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Showing posts with label US Dollar. Show all posts
Showing posts with label US Dollar. Show all posts

June 13, 2015

Rising Interest Rates Play: Short Treasury Bonds

I think it is time to short US T-Bonds. I'm going to give you the fundamental reason and show what the market itself is doing. I'm basing this thesis on the theory that when interest rates go up bonds fall. Maybe it really is that simple. The tricky part has been figuring out when the FED will start tinkering with rates. I think they might do it this year. I don't see anything in the latest BLS employment report to make me think otherwise. You could say headline unemployment of 5% is to high to the FED. Of course the real unemployment rate is higher because they bake the numbers these days. But still real, unreal, semi-real unemployment rates are falling. I say 3% unemployment is unrealistic given the situation we have been in the last 8 years. I think anybody who is intelligent realizes the old days of conceptual thinking about target unemployment rates aren't possible now. Yeah, we could have 3% unemployment in a bubble economy. Let's just get 40% of the economy devoted to financial services(engineering) and see what happens! Any way you look at it unemployment is falling. Maybe I'm smoking dope on this report but this says wages are rising.

In May, average hourly earnings for all employees on private nonfarm payrolls rose by 8 cents to $24.96. Over the year, average hourly earnings have risen by 2.3 percent. Average hourly earnings of private- sector production and nonsupervisory employees rose by 6 cents to $20.97 in May.

For the next exhibit we have job openings. There are more job openings out there than there have been in fifteen years. There were over 5 million job openings in April.
















Let's think about the gravity of the FED raising rates. Will a slight rise really matter that much? I think the banks can handle it. They will still be in a situation to prosper.

Finally, I believe the market itself is saying the top is in for bonds. Below is a five year chart of TLT 20 Year Bonds. The red arrow points to the spike top. A spike top or bottom is one of the strongest reversal chart signals. The top was tested in March and April. It was confirmed in May. The drop for bonds continued and we are in free-fall now. The stock TBT is a vehicle to short TLT. So the way I want to short is with TBT Proshares Ultrashort Treasuries. Any spike upward on TLT is opportunity to get longer TBT.

March 19, 2015

Proof The Dollar is Still Correlated With Asset Prices

Pundits will continue to go on CNBC and business new channels talking about how oil and asset prices are a function of supply and demand and even politics. We can continue to laugh at them with confidence. If you've read my blog for awhile you might remember Quantitative Easing and the Stock Market. You might even remember Why U.S. Stocks Will Rise in 2011. Those old posts just show that the FED has controlled asset prices. To some people that's old news but to others I suppose they will never understand it. Probably the hardcore Keynesians.

Today was another FED meeting. I don't care as much about the language of the meeting as I do the market's reaction. Boy did the market react. During the meeting the dollar index practically crashed and oil rocketed up. You can see the price of oil skyrocket around 1pm below in the ETF USO. In the next chart below you will see the dollar fall dramatically at 1pm also.
Furthermore, precious metals like gold and silver spiked today as well. Here is a chart showing gold.














I believe that without the news today crude oil was on pace to continue crashing. It had already reached the lows of 2009 and the technicals were pointing toward a strong breakdown of the chart. Based on the reaction in the currency markets I see the dollar weakening for awhile now. This is a clear "spike top" chart signal on the dollar.

The charts above are from my favorite trading platform Medved Trader. Jerry Medved was the creator of Quote Tracker which is no longer being updated and was scraped by TD Ameritrade. Check out Medved which is in beta and is free for now.

March 14, 2015

US Dollar Update

I've been bullish on the US dollar for sometime now and have been holding the dollar ETF UUP. Fundamentally with the rest of the world debasing their currency and cutting rates its not surprising to see the tremendous run we have seen in USD. I don't know how much longer this will keep up though. How are we in the US going to raise rates when the rest of the globe is cutting? The other thing is the technical side. Looking at the dollar index it has skyrocketed and is going vertical now. This can't keep up forever. I'm happy to trim off 3/4's of my UUP position into this strength on Monday. Selling 3/4's of the position will lock in the bulk of the 10% gains it gave me. I'll have a stop loss on the remaining shares.
It's very interesting to see the continued pressure the dollar strength has put on commodities, especially oil. Oil looks poised to test the lows of the winter.

February 27, 2015

Direction of the Dollar

The US Dollar has been on a serious bull run lately. No doubt macro forces via the FED's guidance on rate raising are behind it. Since late January the USD has been consolidating. I've been waiting to see what becomes of it. Well folks it has formed a beautiful symmetrical triangle consolidation. A very clear one. I can't remember the last time I've seen such a clean symmetrical triangle on an index or commodity. Maybe gold in 2009. I mean it's that clean and pretty! Below is a chart of gold I drew up in 2009.







Image above from this old article on gold.
The USD has now spiked up off the tip. The chart says Bullish with a capital B. I expect a breakout over the highs and more gains. Here is the chart of the dollar. I've been long the dollar with the ETF UUP.