Wednesday, December 16, 2009

USD trend change: When will it start dragging down the market?

$USD looks to be headed UP for the next many MONTHS (6-12 months is my time target for the trend), as I mentioned last week. Observe a weekly chart.

USD weekly breakout 11 Dec 09

But unless one is a currency trader, as HUGE as a key the USD is, it's not everything....
The USD is well off its 74.23 bottom, yet the market is still at it's highs. I also mentioned 2 weeks ago, that I suspect a rising USD will NOT put a damper on the stock market for the next couple weeks, due to it rolling into the Holiday anemic volume season here.

USD watch 6 Dec 09

I stick by my calls, that the dollar is headed up for the next several months, as well as the stock market will not sell off bigtime till 4 Jan 2009.

 - In regards to the USD, I mean the rubber band for now has popped. What more do they expect out of FOMC to get another dollar drop? These FOMC meetings, they have been telling us what they plan to do BEFORE the meetings. The meeting results are no "surprises" really here. They say 0 rate is the plan, and its working for now, etc etc. 

My point is, Tonight's futures, the USD is on rocking tonight, up .43 as a i type this. So the reaction from FOMC is dollar goes UP. Now, what else COULD they of really said, that would of made it dollar bearish today?  Short of "we will never ever ever increase rates, for 500 years!"...short of something "made up" like that, it just seems fully baked in here. Again, imo the 74.23 was a USD BOTTOM, for the next likely year ahead.

Yet i don't think the market "cracks" tommorow, even if the USD picks up more momentum tonight. Its expo week, then the next 2 weeks are lower volume, due to holidays, etc.

-Much more people today are managing and trading their own accounts than just a few years ago. It is my opinion of that. (no studies performed). It's also my opinion, and speculation that after the brutal 2008, the investors that manage their own accounts, and after having a great + year in 2009 they will choose to DELAY paying any income tax by 365 days, by simply waiting till after 1 jan to sell any stocks that were profitable in 2009. 

-That's my theory of why historically DEC is the most bullish month there is. No one wants to sell and pay tax, if they delay it by 12 months (up years, retail pulls the train).   Then in the down years, when some people might want to sell in dec, to get capital loss and get tax benefit like 2008, the fed steps in, and since its holiday volume it's easier for them. (down years, the ppt pulls the train).  Take alook at the dollar chart in Dec 2008. It's surprising the market was not up 15% for the month with that!!!!! So that's just why I think Dec are so historically bullish, fwiw.

The market does feel very heavy, likes its about to puke it up, it does, anyone can see/feel that. I agree 100% with the "Bernake: time magazine" indicator.  Good quick read here, how TIME magazine has been the best contrarian market signal for a little while now.

Man of the year: Time magazine = Kiss of Death

I stick to my thesis, that holidays=anemic volume
anemic volume=more bullish friendly.

If they keep this act up, (which i hope they do)...will be looking to get short heavy right at the close on 1 Jan 09
(friday's are also bullish freindly, and last year, i recall 1 Jan was a big up day, i just recall Dennis Kneale saying he would "dance a jig, if we broke 9000 or something", and every was talking about the great year ahead.  Remember last time, that the financials and reits were the 2 sectors that had HUGE spikes before the p3 crash.

disclosure: long exm, into years end, with finger on abort/sell button
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