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Forex – Dollar Turns Negative on Weak Housing Data

Forex - Dollar Turns Negative on Weak Housing Data

Forex – Dollar Turns Negative on Weak Housing Data - The dollar fell below breakeven against a basket of major currencies after data showed ongoing weakness in the housing sector but losses were capped by gains in U.S. treasury yields on speculation over the next Fed chair. The U.S. dollar … Continue reading at

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Forex problems limiting imports*

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* Well, the markets sold off big for most of the day, but came back some to recover some of the losses. The US Unemployment numbers came out and our economy lost -131k. The Unemployment rate remained at 9.5%. The problem I have is that last month’s numbers came in at -125k, but were just revised down to -221, or almost double. Will they revised these numbers down significantly too.
The European data is coming out weak too and there markets were all down significantly today. Virtually the only safe haven was gold & silver, some commodities (especially wheat due to shortages & drought), and bonds.
In addition, the housing inventories are growing in most cities. This is the double dip in real estate I have been talking about. In fact, Barney Frank came out and said we need to forgive the homeowners mortgages to the extent that they are “underwater” or upside down. That means if they owe 300k, but their home value went down to 200k, Congress will mandate we forgive 100k. What about the bondholders who own the mortgages as an investment. They were innocent in the whole process.
Sounds like another bailout to me. And just in time for the November midterm elections. The only reason I focus on politics sometimes is that politics and the overall economic environment effects both stock and bond prices. In fact, the bond market is pricing in deflation.
It doesn’t matter how good a stock picker you are, in a strong down trending market, good stocks will go down with bad stocks. Conversely, in a strong up trending market, bad stocks will go up with good stocks. What is the old saying, “All boats float with the tide.”
Therefore, first you have to determine what type of environment you are in, growing or slowing, then formulate a strategy around the overall direction and trend. The wildcard is the government. That is why you have to pay attention to what they are doing. If they announce another big stimulus, it may rally the market, but without that, the news is growing increasingly negative by the week.
One good defensive play, and, contrary to popular opinion, does do well in deflationary times, is gold. Moreover, if they do announce another stimulus, it should rally with a vengeance. I have attached a graph of the spot gold price to show how the upward long term trend is still in place, and it is bouncing off a trend line.
I have made 3 or 4 entry points off the trend line as new money has transferred in, and have been very successful. Everyone is talking about oil. Oil is actually bouncing off resistance, there is plenty of supply, and the global economy is slowing. Thus demand is going down yet supplies are healthy. However, I would have a trade ready just in case there is conflict in the Middle East, namely Iran and Israel. Another bullish scenario is a bailout and more spending and printing by government. Remember, oil is traded around the world in dollars.
Therefore, I would hold off on oil, but be ready. I have attached a graph of the iPath Oil ETN (better tax rules than for an oil ETF) so you can see is rolling over just as it is hitting a resistance line.
Today is a better day than others. I am holding a lot of cash, have bonds, am short Europe, and have 10% Gold and 5% Silver. That is why I believe there is Order in the Universe today. Everything is making sense today.
Those are my thoughts for today and what I am looking at.
Keep studying,
Dan Stewart CFA(R)

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