Wednesday, January 20, 2010

Dollar Takes Off!

What did I tell you the otherday? WATCH THE DOLLAR!

As the dollar is breaking above the 200-ema, the Euro is breaking below it's 200-ema. The crowded trade is taking it on the, silver, oil well as stocks.
Does this mean  that trade has ended? Has the Republican victory changed the tide of overspending by our government and a lower dollar? I don't believe so. Ask yourself how much have things really changed since March 2009?
I'd mentioned over the weeks that we'd be entering a period of transition, the key is jobs for a recovering economy. That would rally the dollar, but today's action is more of a 'cut spending' agenda and the vote in MA is a proxy sending that message to Washington and the Democratic Congress. So...dollar rallys...but how high and how long? I've annotated a chart that I presented a few weeks ago projecting a rally to 82 on the dollar. As I noted yesterday watch the bounce off the its watch the 200-ema. This dollar rally may have further to go.

Strategy, add to energy position on this correction, lighten up on precious metals. Continue to like financials and technology stocks as I written about over the last few weeks. On the radar will be silver stocks such as Silver Wheaton, looking to add to that position (SLW) in the $15 range. Again use weakness to buy or add.

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