Wednesday, June 8, 2011

Short-Term US Dollar Bottom?

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I think yesterday may have marked a short-term bottom for the US Dollar relative to other paper currencies. I don't trade the currency markets other than by buying physical Gold (as an investment) and sometimes paper Gold (as a trade). Now, many Gold bulls get all up in arms when people talk about the U.S. Dollar doing anything but plunging to zero in dramatic fashion. However, no market moves in a straight line and the U.S. Dollar is no exception. I am here to make money, not friends on "The Dollar Will Hyperinflate to Worthlessness by Next Year" Facebook page.

Keeping in mind that bullish sentiment on the horribly flawed Euro currency (the largest component of the US Dollar Index basket) was through the roof a month ago and the bullish sentiment on the US Dollar was non-existent a month ago, here is a 6 month daily chart of the UUP ETF, a proxy for the U.S. Dollar that allows me to show volume, through about 10 AM today with my thoughts:

Now, I am not saying the US Dollar is going to the moon. However, another short squeeze in the US Dollar would fit with a panicky denouement to the current plunge in most markets. I don't think this down leg in common equities will end until we get a day or two of panic. This should end the "risk off" trade and allow the "risk on" trade to return.

Currently, my subscribers and I are short silver (via the ZSL ETF) as a way to make money off of the impending further correction in commodities that will accompany a US Dollar rally. Join us if you are interested in profiting by trading the swings that are bound to occur as we grind towards a secular low in the Dow to Gold ratio of 2 or less.

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