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Created on: 4/24/2011 7:49:54 AM   Last Update: 4/28/2011 10:42:37 PM Posted by: RTT
WARNING: This entry is 5048 days old. It may contain broken links, out-dated or misleading content. Please read on with caution.

1 POST This is the contrarian investors next big winner
this-is-the-contrarian-investors-next-big-winnerWe are waiting and watching this one, we think it could be the trade of the next quarter. Waiting for Mr Market to confirm to us that others are thinking the same way. Well, we know they are, we are just waiting for their wallets to confirm it.

We concur with this fundamental view of the US Dollar as written so well by Jon Thomas of madhedgefundtrader.com.

Extract..

No asset class has suffered more from QE2’s massive expansion of the monetary base than the US dollar. Ben Bernanke’s decision to freeze the Federal funds rate at near zero, while the rest of the world has ratcheted up rates, has proved a death knell for the greenback. It would be a vast understatement to say that this has become a one sided trade, with positions in the futures markets betting against Uncle Buck at record highs. This has become every trader’s free lunch.


We all know how this story ends. When too many traders pile into one end of the boat, it capsizes. Think of stretching a rubber band to its limit and waiting for the snap back. The next chapter in this story has to read that the rest of the world pauses with their rate rises, while the US plays catch up, possibly later in the year. The first round of profit taking in the “RISK ON” assets of stocks, commodities, oil, precious metals, and foreign currencies is certain to trigger a flight to safety bid for the dollar. Then those huge, hot speculative positions in the dollar come tumbling down.


Most over extended on the upside has been the Euro, which seems to want to go higher as its fundamentals worsen. The move from $1.28 to $1.46 has been accomplished with a mere 0.25% rise in interest rates, and some impressive jaw boning by European Central Bank president Jean-Claude Trichet. Never mind that the PIIGS are at or near bankruptcy, most European banks have a negative net worth when their cross holdings of sovereign debt are marked to market, and that Europe’s economy is growing at half America’s rate, and a tenth of China’s.


COMMENTS: We like to check our cycle work for confirmation of the fundamentals, it is always mysterious coincidence when the cycles time well with the fundamentals.

We have posts on the US Dollar that require your review before you consider any US Dollar bullish investment.

Euro approaching another cycle top
Who do you think you are kidding Euro!
US Dollar currency, short term bullish, long term bearish not so sure

The US Dollar has a 60 week cycle that has yet to show up, it may be late, but it is there, and it could be a beast. All it would take for US dollar to break higher is a mere hint that the Fed may raise rates a tiny 0.25% or something similar. The political pressure to get oil and other commodities down just may be played out in May 2011. After all the USA Fed is not immune to politics.

Of course do not do anything until Mr Market rolls over from bearish to bullish.

UPDATE 20110429: Some large bets are flowing into the UUP in the last two days.  Just like prior to previous UUP up turns. Watch for more volume spikes. US Dollar has had an emotional sell off (spring), it wont crash, a bullish rebound is coming as every one positions for QE2 ending.

Latest UUP Etf cycle chart..

Click for popup. Clear your browser cache if image is not showing.
UUP Cycle



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NOTE: Posts here are the lite version, more depth on each subject can be found via our RTT Plus membership.

Changes in the world is the source of all market moves, to catch and ride the change we believe a combination of Gann Angles, Cycles, Wyckoff and Ney logic is the best way to ride the change, after all these methods have been used successfully for 70+ years. This post is a delayed and small sample of what is avaliable to members. Sign up to enjoy the full service.


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Investing Quote...

..“The desire for constant action irrespective of underlying conditions is responsible for many losses on Wall Street, even among the professionals, who feel that they must take home some money every day, as though they were working for regular wages.”..

Jesse Livermore


.."A businessman cannot force you to buy his product; if he makes a mistake, he suffers the consequences; if he fails, he takes the loss. If bureaucrat makes a mistake, you suffer the consequences; if he fails, he passes the loss on to you"..


Ayn Rand

Novice Traders trade 5 to 10 times too big. They are taking 5 to 10% risks on a trade they should be taking 1 to 2 percent risks.

Bruce Kovner


.."It does not take a majority to prevail, but rather an irate tireless minority keen to set brush fires of the freedom in the minds of men"...


Samuel Adams

.."When a dictatorship is a fact. Revolution becomes a right"..


Victor Hugo




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