Most Popular
1. It’s a New Macro, the Gold Market Knows It, But Dead Men Walking Do Not (yet)- Gary_Tanashian
2.Stock Market Presidential Election Cycle Seasonal Trend Analysis - Nadeem_Walayat
3. Bitcoin S&P Pattern - Nadeem_Walayat
4.Nvidia Blow Off Top - Flying High like the Phoenix too Close to the Sun - Nadeem_Walayat
4.U.S. financial market’s “Weimar phase” impact to your fiat and digital assets - Raymond_Matison
5. How to Profit from the Global Warming ClImate Change Mega Death Trend - Part1 - Nadeem_Walayat
7.Bitcoin Gravy Train Trend Forecast 2024 - - Nadeem_Walayat
8.The Bond Trade and Interest Rates - Nadeem_Walayat
9.It’s Easy to Scream Stocks Bubble! - Stephen_McBride
10.Fed’s Next Intertest Rate Move might not align with popular consensus - Richard_Mills
Last 7 days
Micro Strategy Bubble Mania - 10th May 24
Biden's Bureau of Labor Statistics is Cooking Jobs Reports - 10th May 24
Bitcoin Price Swings Analysis - 9th May 24
Could Chinese Gold Be the Straw That Breaks the Dollar's Back? - 9th May 24
The Federal Reserve Is Broke! - 9th May 24
The Elliott Wave Crash Course - 9th May 24
Psychologically Prepared for Bitcoin Bull Market Bubble MANIA Rug Pull Corrections 2024 - 8th May 24
Why You Should Pay Attention to This Time-Tested Stock Market Indicator Now - 8th May 24
Copper: The India Factor - 8th May 24
Gold 2008 and 2022 All Over Again? Stocks, USDX - 8th May 24
Holocaust Survivor States Israel is Like Nazi Germany, The Fourth Reich - 8th May 24
Fourth Reich Invades Rafah Concentration Camp To Kill Palestinian Children - 8th May 24
THE GLOBAL WARMING CLIMATE CHANGE MEGA-TREND IS THE INFLATION MEGA-TREND! - 3rd May 24
Banxe Reviews: Revolutionising Financial Transactions with Innovative Solutions - 3rd May 24
MRNA - The beginning of the end of cancer? - 3rd May 24
The Future of Gaming: What's Coming Next? - 3rd May 24
What is A Split Capital Investment Trust? - 3rd May 24
AI Tech Stocks Earnings Season Stock Market Correction Opportunities - 29th Apr 24
The Federal Reserve's $34.5 Trillion Problem - 29th Apr 24
Inflation Still Runs Hot, Gold and Silver Prices Stabilize - 29th Apr 24
GOLD, OIL and WHEAT STOCKS - 29th Apr 24
Is Bitcoin Still an Asymmetric Opportunity? - 29th Apr 24
AI Tech Stocks Earnings Season Opportunities - 28th Apr 24
S&P Stock Market Detailed Trend Forecast Into End 2024 - 25th Apr 24
US Presidential Election Year Equity Performance in the Presence of an Inverted Yield Curve- 25th Apr 24
Stock Market "Bullish Buzz" Reaches Highest Level in 53 Years - 25th Apr 24

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Forward Thinking for the Markets

Stock-Markets / Credit Crisis 2008 Mar 15, 2008 - 04:59 PM GMT

By: Mike_Paulenoff

Stock-Markets I am not the only market-watcher who has noticed that although the news seems to get progressively worse for the banks and brokers, and stress to the financial system and the Fed (lender of last resort) gets progressively more intense, the stock indices for the most part have held above their January lows. The Jan. 22 low in the Dow at 11,635, for instance, was tested Monday at 11,732, and perhaps we should consider Friday's low at 11,833 as yet another test -- amidst treacherous news and innuendo about the efficacy of Bear Stearns.


And what about the transportation average (DJTA), which did not come within 8% of its Jan. 22 low on any pullback (yet) despite $110/bbl oil and a barrage of expectations that a deep recession is in progress?

Do we give the market kudos for such relative strength? Are the equity indices looking "out there" and seeing something much more positive than the current news and "forward thinkers" see?

I have one theory, having spent eight years proprietary trading foreign exchange for a major NYC bank: that the powers that be realize the dollar has to stabilize or be stabilized and that the carte blanche one-way "freebie" dollar short has got to come to an end -- to ensure that the global financial markets do not implode. If the G-7 or the G-10 coordinated a powerful intervention to sell euro and yen, to buy dollars, then my sense is that a massive one-way trade would rip towards the exits, the dollar could soar 5%-8%, gold and commodities would take a bath, oil would plunge, the flight-to-quality in bonds would be reversed, and money likely would flow into equities in a hurry.

Of course, intervention is no panacea, and the longer the trend, the more bouts of intervention usually are necessary to turn the currency in question (the dollar). In the past 30 years, periods of intervention by the central banks dissuaded the speculators, and ended up putting in major turns.

The stakes are higher now than at any time in my career. If the Fed is intervening in the credit markets to stabilize the money markets, my sense is that foreign exchange intervention has to be on the table as one of its next moves -- to show the interventional investment and banking community that the authorities will spare no effort to restore faith in the markets, and in themselves.

With all of the above in mind, let me reassure you that forex intervention remains only a guess on my part, and I don't base any of my analysis or strategy on the "hope" of intervention. My work is my work... and that is what I use in practice. My theories stay theories, until proven otherwise.

Sign up for a free 15-day trial to Mike's ETF Trading Diary today.

By Mike Paulenoff

Mike Paulenoff is author of the MPTrader.com (www.mptrader.com) , a real-time diary of Mike Paulenoff's trading ideas and technical chart analysis of Exchange Traded Funds (ETFs) that track equity indices, metals, energy commodities, currencies, Treasuries, and other markets. It is for traders with a 3-30 day time horizon, who use the service for guidance on both specific trades as well as general market direction

© 2002-2008 MPTrader.com, an AdviceTrade publication.  All rights reserved. Any publication, distribution, retransmission or reproduction of information or data contained on this Web site without written consent from MPTrader is prohibited. See our disclaimer.

Mike Paulenoff Archive

© 2005-2022 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in