Tuesday, July 5, 2011

Dollar May Be Ready To Explode Higher

While there are a number of possible interpretations, I think the 1 2 [i] [ii] count is the best fit for the US Dollar right now.  What is most interesting is gold and the Dollar up today with no real selling in the stock indexes.  Is the inverse relationship with the Dollar beginning to switch to a positive one?  It has happened many times in the past and may be happening now.  If so, a rising Dollar may support rising stocks.

The information is not widely available, but according to EWI sentiment on the Dollar was at an historic low in May.  It could take many months for the sentiment picture to reverse itself.

I am long the Dollar with a stop at the May low.  I think this trade only has a 60/40 chance of working out, but if it does work out the payoff will be huge making it well worth the risk.  A rally back to the 2009 highs could take many months.

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