"When misguided public opinion honors what is despicable and despises what is honorable, punishes virtue and rewards vice, encourages what is harmful and discourages what is useful, applauds falsehood and smothers truth under indifference or insult, a nation turns its back on progress and can be restored only by the terrible lessons of catastrophe." … Frederic Bastiat

Evil talks about tolerance only when it’s weak. When it gains the upper hand, its vanity always requires the destruction of the good and the innocent, because the example of good and innocent lives is an ongoing witness against it. So it always has been. So it always will be. And America has no special immunity to becoming an enemy of its own founding beliefs about human freedom, human dignity, the limited power of the state, and the sovereignty of God. – Archbishop Chaput


Friday, October 31, 2014

Surging US Dollar Technically Strong on the Chart

The greenback, as illustrated by the USDX, has managed to poke through the chart resistance level at 87 in today's session. The overnight, surprise action by the Bank of Japan, has given currency traders a strong reason to hammer the Yen lower and they are doing exactly that.

The Euro is holding a bit better and is only down some .7% compared to the 2.5+% beating that the yen is taking, but both majors are down against the Dollar and that has enabled the greenback to finally better that tough chart level noted.

Essentially what we have is a currency, that was trading in a very broad range for the last two years that broke out of that range to the upside in September. The reason for the breakout was simple - investors and traders are convinced that is any of the Western industrialized nations ( and I am including Japan in this group ) was going to move higher on the interest rate front, it would be the US.

This is in spite of the clear statements by the Fed that they intend to keep interest rates low for a "considerable time".

The issue however is very clear - the ECB and the Bank of Japan were NOT going to move higher on rates. Neither was Canada or Australia, not with the price of commodities moving lower. In effect, the Dollar wins by default when it comes to the currency of choice for investors and traders in such an environment.

After the upside breakout on the chart, the Dollar has spent the last month consolidating its gains building a base from which to launch the next move higher. That appears to have finally taken place today with the BOJ move the catalyst.

At this point, a weekly CLOSE above 87, sets up a likely run at 89.  As long as the Dollar is exhibiting such strength, gold has little chance of halting its slide lower.

I can add another comment to this... grain traders who are oblivious to these movements in the critical currency markets and are happily chasing grain and bean prices higher, are going to experience a lesson in global markets very soon that they will not forget.

With crusher margins at levels not seen in two months, and at levels which by any historical standard of comparison, are incredibly profitable, they will crush as many beans as they can get their hands upon and do it as fast as they possibly can. At some point, the supposed meal shortage is going to become a meal glut.


  1. Perry Como's advice on gold insurance:

    Catch a falling star,
    Never let it fade away
    Catch a falling star an' put it in your pocket
    Save it for a rainy day

  2. The so called PIG (USD) is looking pretty plump these days despite the collapse that was predicted by the gold/silver pumpers who always have their long knives out trying to keep the collapse meme alive.

    A strong, resurgent USD was simply bad news for the PM's blogsters who persistently moaned about the collapse of the USD and US thereafter.
    They couldn't have been more wrong or misleading.

  3. DPH, they are all pigs, and the dollar is a relatively better pig recently, when compared to the other pigs in the sty. How much real value has the dollar lost in the last 10 years, both with regard to inflation and also the Index itself.? Is it 30% or 40%, or even more. What kind of an investment is that?

    1. The Eurozone is a net creditor with no trade deficit. But those are just fundamentals. Trade the BS not the fundamentals

  4. all the major countries besides USA are still in easing cycles, as shown by japan last nite.
    ..Given the overall hawkish tone of the Fed's statement, a June 2015 rate hike remains the most likely, which makes DX a nice medium term hold.

    NIKK futures on comex went limit up earlier today.

    Ags bulls are relentless, going to be 'outside hook reversals on monthly charts' that print today.

    soybeans the 'alternation' pattern would be a down monday, looks like the soymeal problem going to keep em green today.

    Oct Cattle go off the board at 169.50. From first trade to close, Oct gained $42.20!

    cattle bears are talking the large fund net long.

    for CCI (formerly crb) commodity index that must be a new 5 yr low, nat gas liked with the usa freezing weekend.


  5. I think it was Jim Rickards that said US citizens would be the least affected until the very end when compared to other currencies melting down.

    With low interest rate loans, it does nothing for the Euroland economy. In fact money is fleeing whenever it gets a chance. Lately, usually into US real estate looking for safe havens with a rate of return at or higher than zero. Not negative. Is there any future in Euroland?

    Japan has an underlying problem of nuke power generation. One plant site has been leaking radioactivity nonstop like a sieve for 3 1/2+ years with no end in sight. More than 50 other nuke plants are idle while Japan keeps raising the 'safe' allowable exposure rates to its own people. There is not enough money in the world to fix the problem.

    US$ is the good looking one out of all the ugly sisters. And with the Euro being the largest portion in the weighting basket index, followed by Japan, to arrive at the US$ worth, the dollar could go to hundred no problem.

    I think the least talked about factor is continued US fracking and the price of oil. I understand frack breakeven point is $50. It is unreal what a free market can do (not counting unintended environmental damage).

  6. On another note, the Nikkei futures are up 2,576 points in just 12 trading days.

    Lesson Learned: Anyone fighting against the Central Bank's wishes is simply going to get destroyed, annihalated, and blowtorched.

    Just ask all the Blue Hair CIGA's and the GATA boys, all hopes of retiring anytime soon have vanished. Good luck working bagging groceries boys!!!

    Anyone going to a Q & A session soon? LOL......

    Another golf clap for the KWN Experts, they have a 100% track record so far at getting it exactly wrong.

    1. Nice to see you bsck. My nikkei etf's are doing ok but i expect another 20% upside.

    2. Markie Mark;

      Where have you been man?

      I am getting emails from some of the gold bugs and it is more of the same.... back the truck up and scoop up the bargains. they are totally unfazed. It is really quite scary to watch something like this as the depths to which the human mind can remain oblivious to reality is astonishing.

      You would think that when so many of their priests and prophets declared $1180 rock solid, and a level which was now the bottom as gold "began its next up cycle, blah, blah, blah" they would start second guessing some of these fraudulent writers and duplicitous dealers but if anything they seem even more resolute.
      Case in point: " this is just an orchestrated takedown ahead of the Swiss Gold initiative to discourage the Swiss people from voting 'Yes'".

      there is always a reason with them to remain long... It is like watching a train wreck with parts flying everywhere in slow motion.

    3. Dan, Japan steps in to print money and buy foreign equities just as the Fed exits its money printing program.

      Amazing timing isn't it?

      Yup this will end well for paper currencies, or can central banks really just keep trading off on who is printing money forever and have gold keep going down as they print?

      And Mark only comes out to post when the stock markets are nearing record highs. He lives in the Fantasy land bubble of money printing believing it will work forever.

    4. I am more than happy to see the gold bugs are still optimistic. Means there's a longer way to go down until they capitulate.

  7. Dan, you should go on CNBS, they will love you there.

    you can become a household name just like Joe "blame it on the weather" Lavorgna...you're both bullish on US economy and USD/dow/s(ht)&p(iss) just like everyone was in 1999/2000/2007

    side question: do you work for the obummer administration? lol

    1. Actually if you read his comments over a period of time he is not particularly sanguine on the economy. The actual state of the economy, which may well be abysmal, is not so relevant as the perception by investors of the economy, and the perception of the possibly false factors causing those to arrive at that perception.

    2. James Blogger;

      Actually my real name is Darth Sidious... I was once a Jedi Knight and much loved by the gold cult but then I crossed over to the dark side ( I now know its power) and became a gold bear in the process so now my name is reviled by my former rebel warriors.

      I serve the emperor ( who threatened me with lightning bolts if I did not) and thus take every opportunity to extol the virtues of fiat money and slam gold.

      I am waiting for a call from CNBC however... why do you ask? Would you like to be my agent? I will cut you in for 1% seeing that I am a generous Sith Lord.

    3. Dan, surely you mean you serve the King, but he sent you into exile for treason.

    4. Or, to put it another way, thou didst eat of the fruit of the Tree of Knowledge, and were cast out into the Land of Nod, and there was much weeping, and wailing, and gnashing of teeth. But thou didst prosper mightily, and your followers were legion.

    5. Peter;
      I guess I am now bearing the mark of Cain as well as being related to Darth Vader!

  8. Dan is a trader - he has states many times he does not believe the economy is strengthening, but identifies the sentiment of the market and follows that trend.

  9. Well we are approaching the close. Fresh, world record highs on most stock indexes, and multi-year lows on the monthly close for XAU and GLD.

    Way to go KWN!!!!

    Today I bought big lots of TM, HMC, probably a multi-year run in those Japanese stocks that will challenge the highs from 1989 - 1990.

    Pretty much bought those and will walk away until retirement.

  10. We here for trading for profit not prophesizing or evangelizing things. Even veteran traders like Larry Williams who suggested long gold or Linda Raschke who thought gold would retest 1205 level then rebound. I have paid them to learn from them but now I sit here to learn from Dan totally free. My goodness Larry never mention TIPS spread when recommending long or shot gold. He very expertise in terms of COT report, maybe better than Dan but he feeling pressure of making money from advisory letters so this time he not objective and wrong twice about long gold. Meanwhile, I grateful to read this blog for free. I hope I can learn from Dan for 6 months so I can be independent for trading without any subscription. I currently subscribe to Larry Williams' for weekly, Linda's daily and Marc Faber's monthly. Larry held me not long sp500 from 1830 although I felt so strong to do so. Linda held me to abandon gold shorting idea early because her view so bullish. Finally Marc Faber totally joke this year. He was one of my idols. I red his "Asia Tomorrow Gold" many times. Have admired him since 2007. UNTIL THIS YEAR ! However his comment on gold going down under 1000$ on 2011 Sept now realized. All in all, If I trade on my own, my account would be triple not just 50%. I appreciated all your points of view here but I said goodbye to Peter Schiff, Sinclair and Jim Rogers 2 years ago. Now the hard part, leaving Larry and Marc Faber for my own sake.

    1. Linh, I'll tell you a secret, put please don't tell anyone, it's all a load of you know what. Truth is, nobody has the slightest clue, but we have our faves that we like to believe in, and sooner or later they will lead us to perdition. Since time began there have been those who claim to 'read the future', and have been endowed with some special power, or have access to some magic formula, which information they will impart to you for a price.

    2. Linh one technique that seems to work, until it doesn't, is to go with the herd, and this is known in respectable jargon as 'following the trend' - until you get clocked on the head because the herd has suddenly decided, for no evident reason, to go in a completely different direction. Then you are left like a fish stranded on the beach, gasping for air, because the tide has gone out.

    3. Thank. I guess just my mentality. As Asian we respect too much to seniors like bosses, mentors or religious priests. I need to get rid of it. I read "Fountainhead" and "Atlas shrugged" many times but in practice it quite hard to be a man on your own, spiritually and mentally

    4. Linh, you are an individual, or as you say, man on your own, as evidenced by your awareness with your comments. Westerners are just as silly as Asians. The question is, can we learn from our mistakes?


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