Monday, August 17, 2009

Is The US Dollar Set To Rally?

My observation over the last several weeks...has been to WATCH the Baltic Dry Index ($BDI), I've posted several blogs on this index. I don't see any rally in the dollar as being sustainable, not with the US government debt load. Shorter term possible move up to 80 level, however the long term trend for the dollar is down.

In late February, long-time bear Robert Prechter, Founder & CEO of Elliott Wave International appeared on "Closing Bell," where he predicted a sharp rally. Prechter has been studying the charts for the past 30-years. That's a pretty bullish call for the perma-bear! Since March 9th, the S&P 500 has seen one of the fastest upside moves ever. According to Prechter's latest Elliott Wave Theorist, that 50% gain in five months carried the index to the lower end of his target zone of 1,000-1,100.
Now, he's turning bearish again. His biggest call: the dollar is forming a major bottom and starting a multi-year advance.Prechter also says that the potential for the dollar's bottom is an important thesis for deflation. Another bold prediction: Prechter is calling for the next wave of deflation!
All of this just another bearish signal for stocks and he's recommending investors switch to cash.
I don't necessarily agree with his long term view, but shorter term, we could see a pop in the dollar. see CNBC video clip below....

*click on chart to expand image

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