Mish's Global Economic Trend Analysis Message Board

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Strategies & Market Trends : Mish's Global Economic Trend Analysis

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To: Crimson Ghost who wrote (17570)	12/3/2004 6:51:26 PM
From: mishedlo	Read Replies (1) of 116555

Heinz via email today's dollar plunge looked a bit like a blow-off move....that said, one needs to keep in mind that currency trends are the most inert trends of them all - and one can't argue that there is really a huge short position (although it is certain that most of the hedge funds playing currencies are short), because foreigners continue to hold a huge position in dollar claims. anyway, it's so oversold, plus it's very close to its major low of the early 90's that at the very least we should get an intermediate term rebound soon. the only other possibility in a market so oversold is an outright panic. in this context, i've taken note of the Economist cover, and i remember their 'drowning in oil' cover well, mainly because i loaded up on drillers the very day i saw it. but i also know that with currencies one has to be very careful when assessing the contrarian implications of a cover story - e.g. the fact that EVERYBODY knew that the Russian rouble would collapse in '98 didn't keep it from collapsing. i still remember Jim Rogers ending every TV appearance with the words 'and don't forget to sell the rouble'. of course there's still a material difference between the dollar now and the rouble then...but what strikes me as the most remarkable aspect is that everybody seems to think the weakening dollar 'does not matter' to the stock market, or rather, that it's actually bullish for the stock market. that's what they thought for the better part of '87 too. lastly, one good reason to expect a rebound is the action in the gold stocks - they're not confirming the move in gold, and the only reason for that i can think of is that the market is looking for a dollar bounce. but it must imo happen very soon - if the lows of the early 90's break it could be panic time (a panic in turn would also put in a low, only at even lower levels). have a great weekend! hb

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