This extract which is one of many that was sent out in 2011, illustrate how we turned bullish on the dollar when most experts and especially the masses were howling bloody murder. The assessment was that the dollar could only head lower. As is usually the case, when the masses agree a bottom is usually close at hand.
One thing every single person needs to remember is that every single bull market has experienced several strong corrections and at least one incredibly painful correction; there has never been an exception to this rule and there will never be. Commodities are slowly falling down one by one, it is just a matter of time before oil and precious metals are hit. Despite the dollar trading to new lows, there are still many signals that continue to validate that the dollar is going to mount a multi-month rally.
The time frames have moved, but the pattern has not turned bearish. Lastly, everyone is harping about the dollar trading to new lows; in reality, its July 2008 low is still holding, but many commodities have traded to new all-time highs. This development alone is one of the largest possible positive divergence signals any market can or could ever generate. Market update May 4, 2011
The dollar and the Euro are locked in a deadly battle (at least for the next 6-12 months and possibly longer) and in this battle, we think the Dollar will prevail. The one thing that separates the US from Europe is that the world pretty much knows how bad things in the US are, but they are not getting a proper picture of Europe because the ECB prefers to maintain the illusion that all is well. So far, Europe has done nothing at all to address the root cause of the problems plaguing the PIIGS. What they have done is kick the can further down the road, but the can is getting heavier and heavier and soon it will simply refuse to budge.
Just giving money to Greece and telling them to implement tough austerity measures will not solve the problem; you can only cut so much fat and meat before you hit bone. Greece needs to work on economic development and long-term growth; the implementation of these tough measures is slowing economic growth even more. This means that they will have even less disposable income.
If you have no money even if interest rates drop to zero it is not really going to solve anything. The PIIGS as a group are in serious trouble; they spent and continue to spend money they don’t have and will never have. Spain is going to bite the dust sooner or later. It’s just a matter of time and when that happens the Euro is going to crack and this, in turn, could produce a very strong negative reaction in the world’s financial markets. Market update July 22, 2011
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