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Strategies & Market Trends : Group Theories

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To: macavity who started this subject	9/24/2004 4:49:50 AM
From: macavity	of 1017

The Dollar: This may well be the key to what will happen. Apart from a few deflationistas like myself everyone is surprised at Bonds. (I have no positions so my analysis is always better.) The fact that Bonds rallied from May/Jun was what I expected, but the fact that they have continued post-FOMC is a real surprise to me. I was expecting a post FOMC-induced reaction/pause. We should pay attention to this market. Bonds appear to be clearly saying: "There is no increasing demand for loans". This may be interpreted as there is no recovery (bullish) or a recession is approaching (bearish). There are plenty of reports about Money Supply rates contracting as well. Business is not "taking up the slack". I have recently looked at the $USD and just realised that the Quarterly Charts are Bearish but only by 0.02 points or so. (Q3-04/July low 87.00 vs Q2-04/Apr low 87.02) In short, the LT_Lagging indicators are flat and the IT_TrendOscillators are absolutely mid range. I have no idea or edge to a position here and now from the IT perspective. I would like to think (my deflation idea - again) that the dollar should rally breaking its 55W EMA towards its 55M EMA, but really it has had ample chance and time to do so this year. I will now return to letting the market decide. The critical levels (as we are approaching quarter end assuming we close here) are the July levels of 87.00 - 90.29. Looking at long term (stock) charts and thinking of 4 year cycles and stuff, I can see one interesting scenario (of many). If stocks cannot form a new high, and if the Q1 high was the high, then this would indicate that the peak of the 4 year cycle was before the mid point. This is very bearish (left-sided translation) and lends credence to the secular bears. As commodities are rallying here, a dollar decline now would be bullish for stocks and could generate enough steam for a new high - carry trade 2003 all over again. The problem here is that short-term rates are meant to be rising up and this is anathema to the leveraged carry trader. If $USD < 87.00 then I think that the market is saying that the Fed is done raising rates, which they are not claiming. I do not claim to know which is dog, and which is tail here . The three rate rises have confused some in the market to stop selling the buck for this year. Whether this tells them to now buy it will be key IMO. We have had near to nine months of sideways movement across plenty of asset classes. I am not sure which are leading or lagging. All I can say is that once the dollar resolves itself we could well have some real movement - stocks and gold could be on a tear (in dollar terms). In short, will Mr G and Mr B turn the pumps back on? Who knows? Not I! -macavity

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