As of the close of business this coming Monday, CME Group has lowered the margin requirement for its gold contract from $6,751 to $6,075 per contract. Maintenance Margin also moves lower from $5,001 down to $4,500.
While not a large drop, it always helps on the speculative front when margin rates are lowered.
Friday, June 17, 2011
HUI - Gold ratio reflects the return of a deflationary mindset
If one examines the ratio of the HUI/Gold you can determine whether or not a deflationary mindset or psychology is prevalent among investors/traders.
Note that when the credit crisis erupted in full force in the summer of 2008, the mining shares underperformed drastically against the price of gold as the gold shares plummeted along with the rest of the broad stock market.
It was not until the Fed announced the inception of QE1 in the fall of 2008, that the gold shares began to outperform gold. As a matter of fact, they led the market higher.
Now that the Fed has announced the end of QE2, the gold shares are seriously underperforming against the price of gold bullion as you can see by the sharp move lower in the ratio early this year.
This is the basis behind the ratio spread trade being played by the hedge fund community and why they are able to push the shares lower seemingly at will. As long as a deflation mindset is in place, the shares will underperform against bullion. Not until we get a return of inflation fears (that will come if the Fed moves ahead with some sort of additional monetary stimulus) will the mining shares outperform gold.
I have had some critics rail against me for detailing this strategy but I can tell you from a trader's perspective, it has been an effective and extremely profitable trade. It will stay in place as long as it works and makes money for those who are using it. The hedge funds are simply too large for any other market players to take them on and challenge them on this trade. Only a shift in the deflation/inflation mindset will shake them out.
If rumblings of another case of Fed action on the stimulus front begin to surface, this ratio trade will begin to turn as the smartest ones plying it will exit while they can still secure those paper profits.
In the meantime, one has to be extremely selective in which mining stocks they buy. The weaker ones will be and are the targets of the ratio trade while the stronger ones are more resistant to its effects, even though they are seeing weakness at the present time. Once the market for the shares turns, the strongest ones now will be the leaders on the way back up. Fundamentals will ultimately determine their share prices even while these technical plays are dominating at the present.
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Note that when the credit crisis erupted in full force in the summer of 2008, the mining shares underperformed drastically against the price of gold as the gold shares plummeted along with the rest of the broad stock market.
It was not until the Fed announced the inception of QE1 in the fall of 2008, that the gold shares began to outperform gold. As a matter of fact, they led the market higher.
Now that the Fed has announced the end of QE2, the gold shares are seriously underperforming against the price of gold bullion as you can see by the sharp move lower in the ratio early this year.
This is the basis behind the ratio spread trade being played by the hedge fund community and why they are able to push the shares lower seemingly at will. As long as a deflation mindset is in place, the shares will underperform against bullion. Not until we get a return of inflation fears (that will come if the Fed moves ahead with some sort of additional monetary stimulus) will the mining shares outperform gold.
I have had some critics rail against me for detailing this strategy but I can tell you from a trader's perspective, it has been an effective and extremely profitable trade. It will stay in place as long as it works and makes money for those who are using it. The hedge funds are simply too large for any other market players to take them on and challenge them on this trade. Only a shift in the deflation/inflation mindset will shake them out.
If rumblings of another case of Fed action on the stimulus front begin to surface, this ratio trade will begin to turn as the smartest ones plying it will exit while they can still secure those paper profits.
In the meantime, one has to be extremely selective in which mining stocks they buy. The weaker ones will be and are the targets of the ratio trade while the stronger ones are more resistant to its effects, even though they are seeing weakness at the present time. Once the market for the shares turns, the strongest ones now will be the leaders on the way back up. Fundamentals will ultimately determine their share prices even while these technical plays are dominating at the present.
Gold holding relatively firm as its Safe Haven status comes to the forefront
With all the volatility in the markets attempting to decipher defined trends from short term price action has become a fool's game. Markets are torn between optimism that the global economy is not as bad as some have feared and worries over sovereign debt issues in Euroland, particularly Greece, which have the potential to carry a contagion effect and bleed over into that same global economy, mainly due to large bank exposure to Greek debt.
I should note however that there are several key markets that I am monitoring to try to cut through some of the uncertainty. Among those are gold, crude oil, copper and the bonds. Also, the broader measure of the commodity complex, the CCI, is most helpful in this regards.
Let's take a look at each of these key markets and see how the charts shape up and whether or not we can discern any message as to underying investor sentiment.
Starting first with the larger commodity complex, here is the CCI, Continuous Commodity Index. You will note that it has fallen back below what I consider to be a key level, namely 640, and is flirting dangerously with its chart support levels noted on the chart. A downside breach of this level which cannot be regained within the next week, should that event occur, would signal a longer term top among commodities in general and a shift back to a deflationary mindset among investors/traders. I am of the opinion that Chairman Bernanke is closely monitoring this chart and will be forced to act ( provide another round of monetary stimulus) should this break down as the current FOMC will not tolerate a deflationary mindset taking hold. We know that from reading his papers and his comments in general.
For the time being however, this chart is signaling that traders do not fear inflation at the current time but are seeing the overall global economy as slowing. Keep in mind that I am just the messenger and am reporting what the current thinking of the market is as reflected in the charts. That is the role of a trader - not imposing your view on the market but allowing the market to speak to you and attempting to interpret that speech so that you can profit accordingly.
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I want to repeat here, particularly to my silver bull friends, that silver will UNDERPERFORM gold in such an environment. Silver will only outperform gold in an inflation biased environment.
Now let's take a look at the crude oil markets. I say, 'markets', because we are going to look at both WTI and at Brent. WTI is becoming less and less of a reflective market in the sense of giving us an accurate read on the value of oil in general. The reason for that is because of the nature of the oil that this contract is based on. I prefer to look at Brent crude as a better benchmark for gauging oil supply and demand but old habits die hard and therefore we want to also look at WTI.
Note on the weekly NYmex crude oil chart that the market has broken down below a horizontal support level near the $95 level. While price is still in an uptrend as it remains above the upsloping trend line, it will need to hold there as that is also the confluence of the 50 week moving average. If crude is going to hold, it should not fall below $90 or if it does, should immediately pop back up through that level. In other words, a sharp spike below that level and an upside recovery leading to a close above $90 would be okay but if it cannot recover $90, the technicals would point it lower as that would confirm a bearish flag formation with the potential for a move towards the $80 level.
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Brent crude has a much stronger looking chart. It is not yet signaling a breakdown of the nature that WTI crude is and as such, I believe is a better indicator that oil demand is still relatively firm. I would have to revise that view if it closes below the $108 level and particularly if it were to then move towards $100 and not hold there. We are a long way from the $100 level however so for now this market has yet to signal a deflationary bias.
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Let's now turn our attention to Copper, a very good market for gauging sentiment towards the health or lack thereof of the global economy.
I am providing both a dail chart and weekly chart. On the daily chart, the market is in a bearish posture trading below its 50 day moving average. Instead of providing buying support as it does in a bullish trend, that average is providing a place for sellers to enter. This tells us that sentiment towards higher copper prices has shifted in favor of lower prices as we move forward. Clearly copper is signaling more of a deflationary mindset at the current time.
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On the weekly chart we get a different perspective. This chart shows the copper market remaining in a longer term uptrend as it holds above both the 50 week moving average and the upsloping trendline. It is therefore not yet reflecting any deflationary mindset. That would change should if close below the red support line shown on the chart. For the inflationist mindset to be reflected detailing a shift back towards growth in the minds of investors, copper will need a pair of consecutive weekly closes above the $4.50 level. Until it does, the short term bias is down with the market moving into a level where buying should soon surface. If that buying does not surface, then copper will be voting for deflation. Again, Mr. Bernanke and company will be watching.
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turning lastly to gold - its daily chart reflects the safe haven status of the metal in the midst of the uncertainty and confusion currently reigning over the markets. You can see that unlike some of the other members of the commodity complex, gold is above its 50 day moving average and holding horizontal chart support. The market is range bound on the daily chart with a slight bias to the upside. A drop through $1510 would dent sentiment towards the metal as it would turn the technicals bearish on this chart but as long as it holds $1480 it will not be signaling deflation. Should this market take out $1550, it will signal a move back towards inflation fears based on currency woes.
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Incidentally, Gold, priced in terms of the British Pound, scored a new all time today. This is one of the reasons that in spite of the "risk off" trades that are currently in vogue, the bears are having trouble breaking it down in terms of the US Dollar at the Comex. Gold is trading as a CURRENCY and not so much as a commodity. When gold bears look at the strength in the metal when priced in terms of the other various majors, they lose conviction, even in the midst of large amounts of risk off trades while the gold bulls take heart and step up to buy.
Markets making new all time highs (even if priced in terms of another currency) are not in bearish phases - period! US centric traders do not seem to be able to understand this. For gold to enter a bearish phase, we would need to see it break down across the board, whether priced in Dollars, Euros, British Pounds, etc. The reason for this is that the surge into new highs or near all time highs reflects FEAR about currency stability in the various countries where the gold market is performing so well. That generates buying of gold as a safe haven and reveals strong demand for the metal from those quarters of the globe.
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I should note however that there are several key markets that I am monitoring to try to cut through some of the uncertainty. Among those are gold, crude oil, copper and the bonds. Also, the broader measure of the commodity complex, the CCI, is most helpful in this regards.
Let's take a look at each of these key markets and see how the charts shape up and whether or not we can discern any message as to underying investor sentiment.
Starting first with the larger commodity complex, here is the CCI, Continuous Commodity Index. You will note that it has fallen back below what I consider to be a key level, namely 640, and is flirting dangerously with its chart support levels noted on the chart. A downside breach of this level which cannot be regained within the next week, should that event occur, would signal a longer term top among commodities in general and a shift back to a deflationary mindset among investors/traders. I am of the opinion that Chairman Bernanke is closely monitoring this chart and will be forced to act ( provide another round of monetary stimulus) should this break down as the current FOMC will not tolerate a deflationary mindset taking hold. We know that from reading his papers and his comments in general.
For the time being however, this chart is signaling that traders do not fear inflation at the current time but are seeing the overall global economy as slowing. Keep in mind that I am just the messenger and am reporting what the current thinking of the market is as reflected in the charts. That is the role of a trader - not imposing your view on the market but allowing the market to speak to you and attempting to interpret that speech so that you can profit accordingly.
I want to repeat here, particularly to my silver bull friends, that silver will UNDERPERFORM gold in such an environment. Silver will only outperform gold in an inflation biased environment.
Now let's take a look at the crude oil markets. I say, 'markets', because we are going to look at both WTI and at Brent. WTI is becoming less and less of a reflective market in the sense of giving us an accurate read on the value of oil in general. The reason for that is because of the nature of the oil that this contract is based on. I prefer to look at Brent crude as a better benchmark for gauging oil supply and demand but old habits die hard and therefore we want to also look at WTI.
Note on the weekly NYmex crude oil chart that the market has broken down below a horizontal support level near the $95 level. While price is still in an uptrend as it remains above the upsloping trend line, it will need to hold there as that is also the confluence of the 50 week moving average. If crude is going to hold, it should not fall below $90 or if it does, should immediately pop back up through that level. In other words, a sharp spike below that level and an upside recovery leading to a close above $90 would be okay but if it cannot recover $90, the technicals would point it lower as that would confirm a bearish flag formation with the potential for a move towards the $80 level.
Brent crude has a much stronger looking chart. It is not yet signaling a breakdown of the nature that WTI crude is and as such, I believe is a better indicator that oil demand is still relatively firm. I would have to revise that view if it closes below the $108 level and particularly if it were to then move towards $100 and not hold there. We are a long way from the $100 level however so for now this market has yet to signal a deflationary bias.
Let's now turn our attention to Copper, a very good market for gauging sentiment towards the health or lack thereof of the global economy.
I am providing both a dail chart and weekly chart. On the daily chart, the market is in a bearish posture trading below its 50 day moving average. Instead of providing buying support as it does in a bullish trend, that average is providing a place for sellers to enter. This tells us that sentiment towards higher copper prices has shifted in favor of lower prices as we move forward. Clearly copper is signaling more of a deflationary mindset at the current time.
On the weekly chart we get a different perspective. This chart shows the copper market remaining in a longer term uptrend as it holds above both the 50 week moving average and the upsloping trendline. It is therefore not yet reflecting any deflationary mindset. That would change should if close below the red support line shown on the chart. For the inflationist mindset to be reflected detailing a shift back towards growth in the minds of investors, copper will need a pair of consecutive weekly closes above the $4.50 level. Until it does, the short term bias is down with the market moving into a level where buying should soon surface. If that buying does not surface, then copper will be voting for deflation. Again, Mr. Bernanke and company will be watching.
turning lastly to gold - its daily chart reflects the safe haven status of the metal in the midst of the uncertainty and confusion currently reigning over the markets. You can see that unlike some of the other members of the commodity complex, gold is above its 50 day moving average and holding horizontal chart support. The market is range bound on the daily chart with a slight bias to the upside. A drop through $1510 would dent sentiment towards the metal as it would turn the technicals bearish on this chart but as long as it holds $1480 it will not be signaling deflation. Should this market take out $1550, it will signal a move back towards inflation fears based on currency woes.
Incidentally, Gold, priced in terms of the British Pound, scored a new all time today. This is one of the reasons that in spite of the "risk off" trades that are currently in vogue, the bears are having trouble breaking it down in terms of the US Dollar at the Comex. Gold is trading as a CURRENCY and not so much as a commodity. When gold bears look at the strength in the metal when priced in terms of the other various majors, they lose conviction, even in the midst of large amounts of risk off trades while the gold bulls take heart and step up to buy.
Markets making new all time highs (even if priced in terms of another currency) are not in bearish phases - period! US centric traders do not seem to be able to understand this. For gold to enter a bearish phase, we would need to see it break down across the board, whether priced in Dollars, Euros, British Pounds, etc. The reason for this is that the surge into new highs or near all time highs reflects FEAR about currency stability in the various countries where the gold market is performing so well. That generates buying of gold as a safe haven and reveals strong demand for the metal from those quarters of the globe.
Thursday, June 16, 2011
HUI at a crossroads
I do not need to point out to the readers the abysmal performance of the mining shares. The hedge fund ratio spread trade has destroyed their share value and most of management seems unwilling or incapable of fighting back to protect the interest of their shareholders.
The Gold and Silver ETF's are also partly to blame in that these Trojan Horses have siphoned off a huge amount of speculative money flows that otherwise would have found its way into the mining sector shares. Those products can be used to obtain LEVERAGED exposure to the precious metals without the risk normally associated with outright purchase of a particular mining company. That makes them attractive to hedge funds which can also use them as the long leg of a spread against a short leg in whatever company they have decided that they can target.
Paying out a dividend to shareholders might put a dent in this little game being played by the gold and silver share shorts as it currently costs them nothing to LATHER, RINSE and REPEAT this strategy. If something works for a money making trade, it will continue just as long as it keeps on working. That means they can short the shares at will since they have no opposition. Shareholders may bitch and complain about it, but as long as the status quo continues, the shares will lag the price of bullion.
The non-stop selling barrage has brought the HUI down into a critically significant technical support level near 492-490. This level must hold or if broken, must be recaptured by the close of trading Friday, to prevent a further drop lower.
At this point in time, the only thing that I can see which will lead to the shares outperforming bullion would be another round of monetary stimulus from the Fed. In such an environment, the share prices will outperform the metals initially with silver outperforming gold as well. Will we get one? I do not know but if the stock market continues to slide and the economic data numbers do not improve, I bet we will, impact on the US Dollar notwithstanding.
The Gold and Silver ETF's are also partly to blame in that these Trojan Horses have siphoned off a huge amount of speculative money flows that otherwise would have found its way into the mining sector shares. Those products can be used to obtain LEVERAGED exposure to the precious metals without the risk normally associated with outright purchase of a particular mining company. That makes them attractive to hedge funds which can also use them as the long leg of a spread against a short leg in whatever company they have decided that they can target.
Paying out a dividend to shareholders might put a dent in this little game being played by the gold and silver share shorts as it currently costs them nothing to LATHER, RINSE and REPEAT this strategy. If something works for a money making trade, it will continue just as long as it keeps on working. That means they can short the shares at will since they have no opposition. Shareholders may bitch and complain about it, but as long as the status quo continues, the shares will lag the price of bullion.
The non-stop selling barrage has brought the HUI down into a critically significant technical support level near 492-490. This level must hold or if broken, must be recaptured by the close of trading Friday, to prevent a further drop lower.
At this point in time, the only thing that I can see which will lead to the shares outperforming bullion would be another round of monetary stimulus from the Fed. In such an environment, the share prices will outperform the metals initially with silver outperforming gold as well. Will we get one? I do not know but if the stock market continues to slide and the economic data numbers do not improve, I bet we will, impact on the US Dollar notwithstanding.
Gold very strong in terms of the Euro
Investors fears concerning the nation of Greece with a potential for default on its bonds has kept a very firm bid beneath the price of Gold on the Continent. As you can see on the chart, gold priced in euro terms is within a whisker of its recent all time high. It is this strength which is preventing the Comex gold bears from substantially breaking down the price in US Dollar terms even as we are seeing a general selling theme across the commodity complex today.
Wednesday, June 15, 2011
European sovereign debt woes erupting once again
Growing fears of a Greek government debt default have sent the Euro plummeting in today's trading session. It has also fueled a mad rush back into US bonds after the bottom fell out of that same market in yesterday's session. As I mentioned in my post last evening, the US bond market was liable to reverse course in a heartbeat as soon as the fear index rose once again. That is exactly what happened.
Investors fear a domino-like contagion effect upon the big European banks holding a substantial portion of Greek debt. Combine that with an Empire State Manufacturing Index reading of negative 7.8 (anything below zero shows contraction) plus a 0.3% rise in the core CPI reading (the sharpest rise since 2008), and stocks were hammered while the long bond regained most if not all of its huge losses from yesterday.
What we have here in the US seems more and more like the stagflation of the late 1970's - a slowing economy in which prices continue to rise - a notable exception being that wages are going nowhere. None of this is positive for consumer spending moving forward. While US companies that do a large portion of business overseas are showing good earnings, it is not translating into growth at a sufficient pace to put a dent in the lousy job market.
Oddly enough, I read some news this morning that housing prices in the Silicon Valley are surging as new found wealth from the recent technology IPO's has fueled what looks like another one of those insanely stupid buying binges with all the new rich kids tripping over themselves to bid up the price of their newest status symbol. In some cases they are bidding ABOVE the asking price. It was that same sort of imbecilic psychology that helped contribute to the housing bubble in many communities across the nation back in 2004-2007. I am sure the realtors there are extremely happy but I have to shake my head in bewilderment that many in this nation never seem to learn a single thing.
I think that is what happens when money is made too easily and too quickly instead of sysymetically increased year over year. Don't get me wrong, I begrude no ones success, but there is something that happens to those who find themselves suddenly extremely wealthy. They lose a sense of the value of wealth and how difficult it is to make it and hold onto it. Show me someone who has made a lot of money and then lost it, only to make it back through hard work and I will show you someone who is far more careful of it and far more frugal than those who meet with sudden success. More often than not, it goes straight to their head. It is said that youth is wasted on the young and foolish. I think the same thing could be said of riches on the young and foolish.
Back to the markets however - the collapse in the Euro has sent the US Dollar surging higher as risk trades from yesterday are being yanked off today. This is why I keep saying to traders - do not let any single day's price action fool you into thinking a trend is developing and spur you into placing large positions on. Only the dipsticks that run the hedge funds do that sort of thing. (As you can tell I have nothing but contempt for the majority of hedge fund managers - they are the worst traders on the planet). Smart traders will look at this schizophrenic market behavior and reduce position size or just get out altogether and enjoy some hobbies. Let these other fools shred each other to pieces. You can still trade but just trade in size that will not seriously hurt you if you are on the wrong side of the daily price action.
As the risk trades come off, the equity markets sink ever lower and the commodity markets see further downside. The S&P 500 is getting perilously close to the 1250 level, the level at which it goes negative for the year and at which it threatens to put in a double top on the longer term weekly chart. Should it do so, consumer confidence will fall off the charts. Consumer spending will suffer as the psychological impact of losses in their 401K and other retirement accounts, combined with home values that are also underwater, dampens the desire for big ticket items and forces further retrenchment on that part of the US economic engine. All this will do is build further pressure on the Fed to act. And thus the addiction to monetary stimulus continues until the junkie is hopelessly ruined.
Earlier in the session, gold had recaptured broken support near $1530 and looked like it was attempting to get its footing there. As the equity markets dropped near midsession, the unwind in the risk trades derailed it and took it lower towards $1520. I might add here however that in terms of both the Euro and the British Pound, gold is holding very firm. That should keep it supported in US Dollar terms and prevent a sharper selloff such as what we are seeing in the grains, fiber and energy markets.
As can be expected in this sort of environment, the Continuous Commodity Index is taking a sharp hit and has sunk below 650. As long as it stays above 640 it is still range bound however. A decline through that level which cannot be recaptured quickly will not be good news for commodity bulls as it will reflect the return of the deflation mindset. Rest assured that Bernanke and company are closely watching this chart also.
The Dollar's rally has it strongly back above the 50 day moving average. What is more important that that however is the fact that is has now reached the 100 day moving average. It fell below this critical moving average in January of this year and has been unable to put in a close above it since that time. Should it manage to push past 76 one has to give the move higher respect from a technical perspective. If it can push above 76.50 and hold those gains, we could see the Dollar make a run towards 78 in short order.
Investors fear a domino-like contagion effect upon the big European banks holding a substantial portion of Greek debt. Combine that with an Empire State Manufacturing Index reading of negative 7.8 (anything below zero shows contraction) plus a 0.3% rise in the core CPI reading (the sharpest rise since 2008), and stocks were hammered while the long bond regained most if not all of its huge losses from yesterday.
What we have here in the US seems more and more like the stagflation of the late 1970's - a slowing economy in which prices continue to rise - a notable exception being that wages are going nowhere. None of this is positive for consumer spending moving forward. While US companies that do a large portion of business overseas are showing good earnings, it is not translating into growth at a sufficient pace to put a dent in the lousy job market.
Oddly enough, I read some news this morning that housing prices in the Silicon Valley are surging as new found wealth from the recent technology IPO's has fueled what looks like another one of those insanely stupid buying binges with all the new rich kids tripping over themselves to bid up the price of their newest status symbol. In some cases they are bidding ABOVE the asking price. It was that same sort of imbecilic psychology that helped contribute to the housing bubble in many communities across the nation back in 2004-2007. I am sure the realtors there are extremely happy but I have to shake my head in bewilderment that many in this nation never seem to learn a single thing.
I think that is what happens when money is made too easily and too quickly instead of sysymetically increased year over year. Don't get me wrong, I begrude no ones success, but there is something that happens to those who find themselves suddenly extremely wealthy. They lose a sense of the value of wealth and how difficult it is to make it and hold onto it. Show me someone who has made a lot of money and then lost it, only to make it back through hard work and I will show you someone who is far more careful of it and far more frugal than those who meet with sudden success. More often than not, it goes straight to their head. It is said that youth is wasted on the young and foolish. I think the same thing could be said of riches on the young and foolish.
Back to the markets however - the collapse in the Euro has sent the US Dollar surging higher as risk trades from yesterday are being yanked off today. This is why I keep saying to traders - do not let any single day's price action fool you into thinking a trend is developing and spur you into placing large positions on. Only the dipsticks that run the hedge funds do that sort of thing. (As you can tell I have nothing but contempt for the majority of hedge fund managers - they are the worst traders on the planet). Smart traders will look at this schizophrenic market behavior and reduce position size or just get out altogether and enjoy some hobbies. Let these other fools shred each other to pieces. You can still trade but just trade in size that will not seriously hurt you if you are on the wrong side of the daily price action.
As the risk trades come off, the equity markets sink ever lower and the commodity markets see further downside. The S&P 500 is getting perilously close to the 1250 level, the level at which it goes negative for the year and at which it threatens to put in a double top on the longer term weekly chart. Should it do so, consumer confidence will fall off the charts. Consumer spending will suffer as the psychological impact of losses in their 401K and other retirement accounts, combined with home values that are also underwater, dampens the desire for big ticket items and forces further retrenchment on that part of the US economic engine. All this will do is build further pressure on the Fed to act. And thus the addiction to monetary stimulus continues until the junkie is hopelessly ruined.
Earlier in the session, gold had recaptured broken support near $1530 and looked like it was attempting to get its footing there. As the equity markets dropped near midsession, the unwind in the risk trades derailed it and took it lower towards $1520. I might add here however that in terms of both the Euro and the British Pound, gold is holding very firm. That should keep it supported in US Dollar terms and prevent a sharper selloff such as what we are seeing in the grains, fiber and energy markets.
As can be expected in this sort of environment, the Continuous Commodity Index is taking a sharp hit and has sunk below 650. As long as it stays above 640 it is still range bound however. A decline through that level which cannot be recaptured quickly will not be good news for commodity bulls as it will reflect the return of the deflation mindset. Rest assured that Bernanke and company are closely watching this chart also.
The Dollar's rally has it strongly back above the 50 day moving average. What is more important that that however is the fact that is has now reached the 100 day moving average. It fell below this critical moving average in January of this year and has been unable to put in a close above it since that time. Should it manage to push past 76 one has to give the move higher respect from a technical perspective. If it can push above 76.50 and hold those gains, we could see the Dollar make a run towards 78 in short order.
Tuesday, June 14, 2011
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