Is the bounce in oil just a dead cat bounce and could the higher dollar lead to a general squeeze in the markets?
Rick has some comments on oil and the dollar. He has a higher 120 target for the dollar which could lead to some bad things in the future for the general markets.
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I think that crude can go a bit higher from here and the dollar can fall to 92, but then I think we reverse and the dollar surges to 110 in Fall (where previously I had it targeted for May/June). This could be a big part of why the general stock markets correct in September. I think a September rate hike (as impossible to believe as that may be) into a falling dollar, may get executed, and it will spike the dollar and crash stocks. I think in a couple of months the supply demand fundamentals will nudge commodities a gradual upturn, once the dollar does it’s blow off top. That’s a big speculation at this point, but that’s the directions I see things heading.
US$ blow off top? interesting, what would cause the global capital to run for the exit holding $’s into what, yen, euro? It would take the removal of the ECB QE based on stronger European economic data and the US feds cutting rates after increasing rates 1/2-3/4% that’s a few years out……just as QE in the US was all about bailing out the banking sector its the same reason QE in Europe is in play as it won’t help main street anymore than it did in the US. Germany is a huge winner as the Euro$ falls for their exports and the DAX climbs as money flows into equities out of negative rate bank accounts and the possible return of dollarmark
If crude oil rises the dollar will fall.
As I said there is room for the dollar to fall further to about 92. But then it will reverse up to the blow off top at 110.
The main drivers for a final surge in the dollar for this intermediate top should coincide with the general stock market crash (September?), and as I just mentioned there may be a September Fed interest rate hike (as impossible to believe as that may be) as they execute this into a falling dollar. The hike may be more that “economists” are expecting, and thus it will spike the dollar and crash stocks. ln addition, there will be more drama in the Europe/Greek/ECB mess, the continuing problems out of Japan, and a flash crash in China will effect us here. PMs may get some bid as well in this environment, but it all of that coalescing in fall should cause a flight to illusionary safety in the US Dollar. Things are going to get a little bit messier and unhinged in the latter part of this year. This is the calm before the storm.
Calm before the storm…Yup, could not have said it better myself.
But if you can’t beat them join them (referring to the near parabolic rise in the Shanghai). I am watching and waiting for the index there to pull back on a corrective wave. Intention is to bottom fish the index for its major leg up. We are not there yet. Zerohedge talking about the Shanghai today and suggesting the top is close but I really doubt that. It’s just warming up and months of opportunity still lie ahead of us before it gets truly toppy and bursts an artery. In my humble opinion of course….it is very premature to call a top over there given the massive momentum of people opening trader / broker accounts. The herd is speaking loud and clear and its hard to go wrong early in the game while they are all thundering in one direction towards the usual Buffalo Jump.
There was a time when a countries strong currency represented a strong economy
96.96 is the first support test for the $ index as its the low close since early March, the real test is the big dive March 18th at 94.76 as a real support zone
The suggestion/spin of an interest rate rise cycle kicking in (US) has given the $ strong support as global buyers accumulate the dips knowing full well the opposite is unfolding in Europe as negative rates and QE are in motion, perhaps the focus should be not how high the US$ can go but just how low will the ECB action drive the Euro$ as Greece is the debt focus for now but how long before Spain or France, Italy take centre stage?
Just as gold rose with the US$ off the Nov lows into March, Oil has done the same since the March 18th US$ dive to 94 climbing 6 cents while oil climbs $16
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that is your future looking back at you……ha,ha 🙂
I think the following is temporarily giving the dollar a boost, as the Euro declines. Eastern European currencies are in a rout against Swiss Francs, but that means also the $U.S.
Negative rates didn’t affect Swiss Francs as it has the Euro.
I would suggest that the rally is a sentiment driven rally. At the bottom in Mar. sentiment was down to 24% bulls. That’s the same level as the 09 bottom.
Typically bear market rallies will dirve sentiment at least to 40-50% bulls before rolling over and making another leg down.
As of this week sentiment in oil is 33%, so still room to run on the upside before the rally is in jeopardy.
I agree that it is a sentiment driven counter-trend rally, and has a little more room to run (15-20%)before rolling over.
Gary–how about a sentiment driven rally in natural gas?
The weekly chart on Nat Gas sure looks interesting Jane. I am guessing that’s what you are referring to. We are sitting right smack dab on 2012 support right now. This is theoretically a good place for a bounce to kick in. And yet, we are heading towards the warm summer months. My bet is Gas break lower from here.
Yes, I think the time for Nat gas will be at the end of 2015 and moving into 2016.
Thanks Shad
You are welcome Jane 🙂
I went back in the last 2 days with a full position in XOP having sold at 56.06 last week.
You’ve been doing very well buying the dips and selling into strength on the XOP Paul.
Well done sir!
Another possibility will be China bringing it’s gold-backed Renminbi to market before the U.S Dollar kills everything. So if this were to happen, it would do so within the next 12 months.
Am I smoking too much funny stuff on this thought/call?
The Chinese would love to be able to devalue but have a soft peg on the dollar. So what is good for the US where the dollar begins another decline is also by default good for China. A Yuan backed by gold meanwhile would cause the Yuan to be in heavy demand and thus push it to unsustainably high levels pretty much killing most of the struggling Chinese producers / exporters who at this time are on wafer thin margins. It is an extremely unlikely scenario that China makes its currency gold backed at a time when everyone else is in the devaluation game.
What happens IF Yuan is allowed to find it’s own level?
This is something I can’t get my head around.
I presume the effect would be the opposite of what happened when Swiss Franc was unpegged, but I don’t know.
That’s a good question Irwin. I have no idea right now what would happen if it was being traded along with the other major currencies and was just cut loose. Right now I kind of think of it as a currency that’s on training wheels being sheltered and semi-tied to the fortunes of USD.
Rick/Cory:
You think the $ is headed to 120 area and it will “undo the Fed and central banks”. Well, if that is the case, what do you think the Fed can do about it? Create a bigger supply or is there nothing they can do? Please comment
This rally in oil reminds me of the summer 2013 rally in gold from $1180 to $1434.
Go on Rick; what’s your expectation, dollar 160?
Rick,
Your comments regarding the strength in the dollar make complete sense. I do think we see one more run up coming shortly. I don’t think it goes to 1.20 , as it would course havoc around the globe. I can see 1.07 to 1.11 tho.
agreed, as stated above in the blog.
It’s kind of funny Chartster when we have to consider that if there was really a superpower behind the curtain that could manage (manipulate) all markets on a whim that they would be busy pushing the dollar down to ensure the Fed can raise rates this summer and fall.
What Rick said was that a much higher dollar would basically kill the economy, destroy growth prospects, blow up the emerging markets and make rate hikes virtually impossible.
It begs to reason that if risks were really that high that the Central Banks and Finance Ministers of the major countries would organize a way during their frequent meetings to push the dollar back down. Certainly they would want to talk it back to normal levels and take the froth off the top.
No matter though. That won’t be necessary since bullishness on the buck is so extreme that anyone betting on it going higher is going to be on the wrong side of the trade.
Rick knows that. So it puzzles me he is so insistent on his 1.20 target.
I do agree that a higher dollar foretells a more unstable global economy, and I think we’ll have a few spasms in Fall that will cause a temporary flight to safety in the dollar and could see the 107-111 range Chartster suggests…..but only as a blow off parabolic top. Not a long lasting process.
Longer term I feel the US dollar will fall to around .76-.78 in 3-4 years. All the wheels are in motion for a change of the guard, and a new paradigm, and the BRICS want in on the action, as does the developing world. This is the final chapter of King Dollar and the US having the sole dips on the world reserve currency, but it will take a few years to unwind it.
that should have said “sold dibs” not dips. : – )
Although, people that go the long the dollar on the next round up will end up being dips, because longer term the dollar is getting it’s clock cleaned.
and that should have said “sole dibs” not sold dibs.
Sorry, I must be off my rocker today.
do not worry , the spelling bee does not start until next year, and as far as the rocker contest, you need to be at least 60 yrs of age to enter.
I kind of liked Sole Dibs…..sounds like a groovy new band.
It’s kind of funny Chartster when we have to consider that if there was really a superpower behind the curtain that could manage (manipulate) all markets on a whim that they would be busy pushing the dollar down to ensure the Fed can raise rates this summer and fall.
What Rick said was that a much higher dollar would basically kill the economy, destroy growth prospects, blow up the emerging markets and make rate hikes virtually impossible.
It begs to reason that if risks were really that high that the Central Banks and Finance Ministers of the major countries would organize a way during their frequent meetings to push the dollar back down. Certainly they would want to talk it back to normal levels and take the froth off the top.
No matter though. That won’t be necessary since bullishness on the buck is so extreme that anyone betting on it going higher is going to be on the wrong side of the trade.
Rick knows the routine. So it puzzles me he is so insistent on his 1.20 target in the face of odds that are so stacked against his basic premise which is deflation come hell and high water.
What seems more probable to me, given that the Fed keeps expressing it will raise rates, is that they will take steps to induce inflation as an offset to rate tightening. This is the only major valve available if debt is to remain manageable.
So the dollar in other words MUST go down. And that also means crude oil prices will go back up along with advances in the Euro. We just cannot have it any other way without something major breaking.
Sorry….posted that twice. Whatever!
Aaaannnnnnd…..somebody fixed it for me and deleted the surplus comment. Cool 🙂 …I like this new system Al where you guys are watching the comment threads more closely. Thanks.
Birdy,
Thanks for the sane comments.
Thanks. It’s a rare day anyone here comments on my sanity with a positive spin!
This chap Clive Maund has just posted an article which, if I am reading it right, he thinks means that the USD is about to head lower… possibly.
http://clivemaund.com/article.php?art_id=3446&PHPSESSID=d90555f6588c1c7f45c9a6979bd7644d
Thanks Bob, he is usually good with his charting.
Hey Dan. I ended up averaging down in Scorpio yesterday and today. I did the same in Great Panther. Yesterday I also did a nice swing trade in Coeur, and sold the remainder today (but too early because it kept rising).
Also the Uranium stocks Uranerz and Ur-Energy have been surging the last few days. I can’t remember, don’t you have a few uranium miners too?
You doing any buying or selling with Silver stocks?
I bought into SPM more a couple weeks ago but sold my UWE (U308 Corp) to buy into SPM a couple months ago. UWE is up from .035 to .055 cents today. Ugh! I am in my shoulder earning season so I haven’t had new capital to deploy since. (;-)
UWE news today. I don’t own any anymore.
A sale of 1000 shares went through at the bid when the bell rang at the end of the trading day, price went from 19.5 to 19 cents. This happens often with this stock. It trades on 3 different exchanges in Canada. IMHO this creates abundant chances for the brokerage houses to open short positions that fill near the end of day. Who knows? Follow the money I guess.
The dollar is going to head lower for a while (possibly as low as 92), but then it will reverse direction and thrust up toward the latter part of 2015.
He definitely thinks the dollar is at a critical juncture but is not quite willing to make the call on its direction. Doubt persists. Amazing to me when it is so obvious. You need more confidence than that expressed to make a buck on the trade before it actually happens though. Anyway, this one sentence from his article summed his ideas fairly well I thought.
“The dollar had better pull itself together and get on with it and advance away from the danger zone soon, because if it doesn’t, the risk of a sharp break lower will grow rapidly. Given the current extreme COT and sentiment readings for the dollar, any such break lower is likely to trigger an avalanche of selling”.
An avalanche of selling…..he has got that right. Once we break below 95 the game will change entirely. Already there are the first whispers of doubt that the dollar can sustain a run higher.
Sure took everyone long enough!
Bird and Shad,
Good points. Rick sure did make sense regarding the strength with no major pullbacks. It looks to me like one last gasp up and a blowoff top. Then down for several years. I can’t see 1.20 happening at all. I do see .72 in a year or so.
Rick is technically right in stating the buck is still in a bull market. The dollar is still well within its rising trend channel and must break below that before we can really call an end to this huge run up. I am ahead of myself in calling the top early though but what I am tracking gives me a high degree of confidence we have seen the top and it is done.
That kind of cockiness often gets punished btw….just so you know. But its my nature.
Well, I will agree that we need to at least see the dollar drop below 95 before there can be confidence a more sustainable decline is in the works. I have no doubts we will get there so I don’t bother worrying about another abrupt round of dollar strength. In any case, rising oil prices are effectively the relative inverse of a dollar in decline. So naturally I side with crude continuing its trajectory higher.