Best of the Week
Most Popular
1. Investing in a Bubble Mania Stock Market Trending Towards Financial Crisis 2.0 CRASH! - 9th Sep 21
2.Tech Stocks Bubble Valuations 2000 vs 2021 - 25th Sep 21
3.Stock Market FOMO Going into Crash Season - 8th Oct 21
4.Stock Market FOMO Hits September Brick Wall - Evergrande China's Lehman's Moment - 22nd Sep 21
5.Crypto Bubble BURSTS! BTC, ETH, XRP CRASH! NiceHash Seizes Funds on Account Halting ALL Withdrawals! - 19th May 21
6.How to Protect Your Self From a Stock Market CRASH / Bear Market? - 14th Oct 21
7.AI Stocks Portfolio Buying and Selling Levels Going Into Market Correction - 11th Oct 21
8.Why Silver Price Could Crash by 20%! - 5th Oct 21
9.Powell: Inflation Might Not Be Transitory, After All - 3rd Oct 21
10.Global Stock Markets Topped 60 Days Before the US Stocks Peaked - 23rd Sep 21
Last 7 days
Silver Long-term Trend Analysis - 28th Nov 21
Silver Mining Stocks Fundamentals - 28th Nov 21
Crude Oil Didn’t Like Thanksgiving Turkey This Year - 28th Nov 21
Sheffield First Snow Winter 2021 - Snowballs and Snowmen Fun - 28th Nov 21
Stock Market Investing LESSON - Buying Value - 27th Nov 21
Corsair MP600 NVME M.2 SSD 66% Performance Loss After 6 Months of Use - Benchmark Tests - 27th Nov 21
Stock Maket Trading Lesson - How to REALLY Trade Markets - 26th Nov 21
SILVER Price Trend Analysis - 26th Nov 21
Federal Reserve Asks Americans to Eat Soy “Meat” for Thanksgiving - 26th Nov 21
Is the S&P 500 Topping or Just Consolidating? - 26th Nov 21
Is a Bigger Drop in Gold Price Just Around the Corner? - 26th Nov 21
Financial Stocks ETF Sector XLF Pullback Sets Up A New $43.60 Upside Target - 26th Nov 21
A Couple of Things to Think About Before Buying Shares - 25th Nov 21
UK Best Fixed Rate Tariff Deal is to NOT FIX Gas and Electric Energy Tariffs During Winter 2021-22 - 25th Nov 21
Stock Market Begins it's Year End Seasonal Santa Rally - 24th Nov 21
How Silver Can Conquer $50+ in 2022 - 24th Nov 21
Stock Market Betting on Hawkish Fed - 24th Nov 21
Stock Market Elliott Wave Trend Forecast - 24th Nov 21
Your once-a-year All-Access Financial Markets Analysis Pass - 24th Nov 21
Did Zillow’s $300 million flop prove me wrong? - 24th Nov 21
Now Malaysian Drivers Renew Their Kurnia Car Insurance Online With - 24th Nov 21
Gold / Silver Ratio - 23rd Nov 21
Stock Market Sentiment Speaks: Can We Get To 5500SPX In 2022? But 4440SPX Comes First - 23rd Nov 21
A Month-to-month breakdown of how Much Money Individuals are Spending on Stocks - 23rd Nov 21
S&P 500: Rallying Tech Stocks vs. Plummeting Oil Stocks - 23rd Nov 21
Like the Latest Bond Flick, the US Dollar Has No Time to Die - 23rd Nov 21
Cannabis ETF MJ Basing & Volatility Patterns - 22nd Nov 21
The Most Important Lesson Learned from this COVID Pandemic - 22nd Nov 21
Dow Stock Market Trend Analysis - 22nd Nov 21
UK Covid-19 Booster Jabs Moderna, Pfizer Are They Worth the Risk of Side effects, Illness? - 22nd Nov 21
US Dollar vs Yields vs Stock Market Trends - 20th Nov 21
Inflation Risk: Milton Friedman Would Buy Gold Right Now - 20th Nov 21
How to Determine if It’s Time for You to Outsource Your Packaging Requirements to a Contract Packer - 20th Nov 21
2 easy ways to play Facebook’s Metaverse Spending Spree - 20th Nov 21
Stock Market Margin Debt WARNING! - 19th Nov 21
Gold Mid-Tier Stocks Q3’21 Fundamentals - 19th Nov 21
Protect Your Wealth From PERMANENT Transitory Inflation - 19th Nov 21
Investors Expect High Inflation. Golden Inquisition Ahead? - 19th Nov 21
Will the Senate Confirm a Marxist to Oversee the U.S. Currency System? - 19th Nov 21
When Even Stock Market Bears Act Bullishly (What It May Mean) - 19th Nov 21
Chinese People do NOT Eat Dogs Newspeak - 18th Nov 21
CHINOBLE! Evergrande Reality Exposes China Fiction! - 18th Nov 21
Kondratieff Full-Season Stock Market Sector Rotation - 18th Nov 21
What Stock Market Trends Will Drive Through To 2022? - 18th Nov 21
How to Jump Start Your Motherboard Without a Power Button With Just a Screwdriver - 18th Nov 21
Bitcoin & Ethereum 2021 Trend - 18th Nov 21
FREE TRADE How to Get 2 FREE SHARES Fractional Investing Platform and ISA Specs - 18th Nov 21
Inflation Ain’t Transitory – But the Fed’s Credibility Is - 18th Nov 21
The real reason Facebook just went “all in” on the metaverse - 18th Nov 21
Biden Signs a Bill to Revive Infrastructure… and Gold! - 18th Nov 21
Silver vs US Dollar - 17th Nov 21
Silver Supply and Demand Balance - 17th Nov 21
Sentiment Speaks: This Stock Market Makes Absolutely No Sense - 17th Nov 21
Biden Spending to Build Back Stagflation - 17th Nov 21
Meshing Cryptocurrency Wealth Generation With Global Fiat Money Demise - 17th Nov 21
Dow Stock Market Trend Forecast Into Mid 2022 - 16th Nov 21
Stock Market Minor Cycle Correcting - 16th Nov 21
The INFLATION MEGA-TREND - Ripples of Deflation on an Ocean of Inflation! - 16th Nov 21

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

The Beaten Down U.S. Dollar Is A Buy!

Currencies / US Dollar Jun 25, 2011 - 03:36 PM GMT

By: Sy_Harding


Best Financial Markets Analysis ArticleWhere are investors to turn for profits?

U.S. and global stock markets are in corrections, producing losses for investors, and they do not look like their declines have ended yet.

Investors who flocked into commodity trading over the past year are now having their heads handed to them with the sudden collapse in commodity prices.

The price of oil, which had surged up from $70 a barrel a year ago to $115 a barrel in April, with Wall Street firms calling for $150 a barrel by September, has instead plunged 20% to $92 a barrel. The CRB Index of Commodity Prices, which surged up 50% over the past year to its peak in late April, has plunged more than 10% in the two months since, hitting a new low this week and showing no signs of bottoming.

For the most part, Wall Street firms are recommending that investors take advantage of the lower prices and buy the dips. But it would seem that at least waiting for prices to stop declining, and for clear signs of an upside reversal being underway would be wiser decision.

Meanwhile, gold, the historic hedge against inflation, and pretty good forecaster of commodity prices, surged up 50%, from $1,060 an ounce 14 months ago, to $1,575 an ounce in April, but has fallen back $70 an ounce in the two months since.

And some of the remarks of hedge fund managers at their GAIM conference in Monaco this week indicate the decline for gold, and therefore most likely commodities, may not be over.

Hedge funds have been among the most aggressive buyers of gold over recent years. But a number of executives at the GAIM conference said gold and base metals are now over-priced.

The CEO of FRM Capital Advisors said “I sense they are peaking.”

Robert Marquardt, founder of hedge fund firm Signet, told Reuters he has closed down a fund he launched in 2003 that was denominated in gold, and returned the cash to its investors. He said, “Gold at $1,500 is now a speculation, no longer a store of value.”

So again, where are investors to look for the next likely profit opportunity?

I suggest the U.S. dollar.                           

While stocks, commodities, and gold, seem to be paying the price for having become overbought in a binge of excited bullishness by investors, the U.S. dollar is at the opposite extreme of its cycle, extremely oversold and out of favor.

Last fall, the Fed’s QE2 program began pouring $600 billion of additional dollars into the financial system through treasury-bond purchases. As a result, the dollar, which was rallying nicely last summer, reversed sharply to the downside, and two months ago was at a low not seen since the middle of 2008.

At that point, technically the dollar was oversold beneath its 30-week moving average, and the plunge had investor sentiment extremely bearish, investors convinced that the dollar was finished for good as far as being a global store of value.

And sure enough, with that indication that everyone who was so inclined had already sold the dollar, it found a bottom in May and has begun what I believe will be a sustained rally.

 My work is based primarily on technical analysis of markets, and my technical indicators triggered a buy signal on the dollar on May 11. But there are also reasons in the fundamentals to expect a sustainable dollar rally.

They include that the Fed’s QE2 program of pumping excess dollars into the system has expired, and the Fed has said it has no plans to extend the program. The dollar was rallying nicely before QE2, and it’s reasonable to expect the end of QE2 will have the dollar back in rally mode.

And then there is investor sentiment, the current extreme of bearishness regarding the dollar. High levels of bullishness are usually seen at market tops, and extreme bearishness at market bottoms.

In that regard, long-time dollar bear Jim Rogers of Rogers Holding, made an interesting admission in an interview in Bloomberg Business Week this week. The interviewer was puzzled, and said, “You are the ultimate dollar bear, yet you just told me you are buying the dollar. Why is that?” To which Rogers replied, “Because everyone is bearish, including me. I read something like 97% of people are bearish on the dollar. So I bought dollars.”

But how do ordinary investors buy dollars, without getting involved in high-risk foreign currency trading (forex), which is best left to professional trading firms?

The PowerShares DB U.S. Dollar Bullish etf, symbol UUP was established in 2007 to track with the U.S. dollar. Being an exchange-traded-fund, it trades on stock exchanges like a stock, and is available through any brokerage firm.

In the interest of full disclosure, I and my subscribers took positions in UUP at my May 11 buy signal, and still hold them, expecting a sustainable dollar rally.  

Sy Harding is president of Asset Management Research Corp, publishers of the financial website, and the free daily market blog,

© 2011 Copyright Sy Harding- All Rights Reserved

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

© 2005-2019 - 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