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Strategies & Market Trends : The coming US dollar crisis -- Ignore unavailable to you. Want to Upgrade?

To: ggersh who wrote (24133)	11/10/2009 3:06:03 PM
From: ggersh	Read Replies (1) \| Respond to of 71463

FAIR VALUE = -245 BUY PROG = -145 SELL PROG = -345 CASHIN’S COMMENTS TUESDAY, NOVEMBER 10, 2009 [AN ENCORE PRESENTATION] On this day (-1) in 1953 (at least according to folklore in the artsy-craftsy community), the young (but already great) Welsh poet, Dylan Thomas turned on his bar stool at the White Horse Tavern in Greenwich Village and remarked "That's eighteen straight whiskeys. I do believe that's a record." He then fell to the floor and died. It's a great tale and a Homeric one that would make any fellow Gael (or even some lesser being with soul) envious. The only problem is that most of it is erroneous. The drinking bout at the White Horse did occur but it took place on November 4th. The remark about the record was made to his "lady friend" when he returned to their apartment at the Chelsea Hotel that night. And, though he died on the 9th, it was actually in St. Vincent's Hospital (about four blocks from the White Horse). Finally, eighteen straight whiskeys is no record - at least not if I have counted the empties correctly over the years. The bulls thought Monday’s tape was positively poetic as the Dow soared to new highs. The skeptics pointed to another low volume leg up. While there were no signs of mass conversions, the bulls did at least convert Investors Business Daily back to the “market in confirmed rally” mode. Dollar Basket Drops to 15 Month Low Sending Dow And Gold To New Highs – The greenback got drubbed again and all the inverse correlations seemed to reassert. The Dow, as noted, went to a new high. The S&P failed to make a new high, nonetheless, it gave a very credible performance. Broader averages were even less strong. We’ll go into potential technical implications of those divergent performances a bit later. For now, let’s note the dollar influence. The Dow is heavily weighted with large multi-national players. A lower dollar makes their products/services cheaper in Europe and Asia. The weaker dollar makes those off-shore earnings more powerful (and plentiful) on reconversion to the weak dollar. The S&P has a bit less multi-national concentrations and the Russell even less. So, the weak dollar not only helps fund purchases of stocks and commodities it makes some of their businesses look better. The rally came primarily in two stages. First and most powerful was the opening spurt. That was driven by the G20’s unanimous pronouncement that it was way too early for the governments of the world to take their respective feet off the accelerator. That helped to push the dollar lower with the above noted rally in stocks and commodities. The second leg of the rally was a steady step by step advance eating through various levels of resistance. Interestingly, there was no meaningful pullback throughout the day. Bears Running Out Of Room But Not Conceding Yet – In his MarketWatch column this morning, Mark Hulbert cites comments by Peter Eliades. Here’s a bit of what Hulbert wrote: One of the stock market timers I monitor who currently is quite bearish is Peter Eliades, editor of the Stockmarket Cycles advisory service. It is tied for second place for performance since October 2007, when the stock market reached its all-time high, having produced a 7.3% annualized gain. Over the same period, the stock market itself suffered a 14.7% annualized loss. In an email to clients, following Monday's 204-point rise in the Dow to a new recovery high, Eliades reviewed a number of technical reasons why the rally is on shaky ground. Three of the leading reasons are: • Even after rallying so impressively in recent sessions, the stock market has merely made it back up to the downtrend line from the October 2007 high. • The rally has come on progressively lower volume: "The market has now advanced for six consecutive days on a closing basis. Each of those days has seen lower volume than the preceding day except for today [Monday] which saw a slight increase in volume above Friday's volume but was still below Thursday's volume." • The Dow's new high was "unconfirmed by virtually every other index or average. In fact, some of the indexes such as the Russell 2000 index of smaller cap stocks have performed very poorly on a relative basis compared to the Dow. The Russell 2000 actually reached its top on Sept. 23 and has now retraced just over 50% of the losses from that high. It is nowhere near either its September or its October high. The same is true for unweighted indexes, such as the Value Line Arithmetic and the Value Line Geometric." Cashin’s Comments Tuesday, November 10, 2009 Page 2 To be sure, Eliades concedes that he didn't expect the market to rally as far as it has already. And continued strength could lead him to "completely change the market's intermediate to longer-term outlook." In the meantime, though, he believes that Monday's action was a "final fake-out move to the upside." Eliades is not alone in being skeptical of the rally. Yesterday, we noted Robert McHugh’s comparisons between some recent patterns and the topping action in October 2007. He remains concerned, although he concedes we might see a last capitulation up spike. Here’s what he wrote overnight: Stocks are rising in their final wave c-up of (E) up, which when complete will be the top of wave (B), the end of the rally from March 2009. This rally will complete the Ascending Expanding Wedge in the S&P 500, so it could be a spike rally toward the upper boundary. The decisive breaks below the bottom boundary lines of Rising Bearish Wedges for the Industrials, S&P 500, and NDX suggest a major top is occurring now. We also see Bearish Divergences between prices and breadth, prices and volume, and prices and momentum indicators that we follow. The Weekly MACD indicators are topping and curling over. These are red flags warning not to trust the sustainability of this rally. As you can probably detect, McHugh leans heavily on Elliott Wave theory. He is concerned that a very, very sharp down-leg may be at hand. There are several other bears who appear adamant that the energizer bunny rally has not worn them out. But, they all appear to be running out of wiggle room. Cocktail Napkin Charting – As we noted on the UBS Squawkbox, we missed the actual level of that uptrend line in the S&P. We thought the napkins suggested 1075/1080 depending on the thickness of your pencil. Thanks to some nice folks with computers, we learned it was really 1086/1089. The late day surge took the S&P to its closing high of 1093. The target for the bulls now becomes a new rally high (ala the Dow). The existing rally high was at 1101 back on October 21st. Consensus – Rallies on low or declining volume are historic warning signals. Maybe they’re a false alarm this time but decades long habits are hard to shake. Be careful. Stay nimble. Trivia Corner Answer - Bob won the new race by a yard. In the first race Bob ran 100 yards while Ross ran 90. If the race took, say, 10 seconds then Bob ran 10 yards per second while Ross ran 9 yards per second. Thus Bob would run the 110 yards (100 + 10 yard handicap) in 11 seconds enough time for Ross to run 99 yards. Today's Question - Congratulations! You've just been put in charge of the U.S. Partially Open. You have 245 qualifiers. Assuming the top seed draws a "bye" in the first round, how many total tennis matches (including quarter finals, etc.) must you schedule to determine a champion?