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We Could See a Huge Rebound in the Dollar Right Here

By Jeff Clark
Tuesday, October 5, 2010

By now, we all know everything is linked to the dollar – in an opposite sort of way.
 
When the dollar goes down, we get a rally stocks, bonds, and commodities. When the dollar goes up, everything else hits a rough patch. So it's important to keep an eye on the greenback and to look for clues to when it's about to change direction.
 
Accurate predictions are always hard to make. But we've done pretty well forecasting the dollar moves here in Growth Stock Wire over the past year. We turned bullish on the buck last September and then reiterated that bullish view in November. The greenback rallied 17% in seven months.
 
On June 8, we turned bearish on the dollar – within one day of the exact top.
 
Since then, the buck has dropped 12% in four months.
 
Here's how it looks on the chart...
 
 
Now it's time for another prediction... The dollar is poised for a strong bounce higher.
 
Investor sentiment toward the greenback has shifted from wildly bullish to overwhelmingly bearish. It's hard to find anyone who will say anything positive about the dollar. And the most popular trade in the currency market these days is to be short the greenback.
 
We're basically back in the same position as we were last November. Only this time, the decline heading into this position has been much steeper. So the bounce coming out could be steeper as well. Let's take a different view of the chart...
 
 
This is a remarkably steep falling-wedge pattern. These patterns usually break suddenly to the upside – and the steeper the pattern, the more violent the move.
 
There's still room for the dollar to fall a little more before hitting the support line on the chart. But there's a ton of risk for a quick reversal.
 
If you're buying stocks, bonds, or commodities on the premise of a lower dollar, you may want to hold off on that idea until after we get a strong bounce in the buck.
 
And if you're looking for a reasonable speculation, buying the greenback right here looks pretty good to me.
 
Best regards and good trading,
 
Jeff Clark




In The Daily Crux Recent Articles
Market Notes
Commodity uptrend holds steady… gold, silver, crude oil trade flat Monday as stocks fall.
 
The Volatility Index jumps 8%... "fear" levels flirt with one-month high.
 
Las Vegas Sands jumps to fresh high... Macau gambling revenue grows 40% in September. 
 
Investors still love safe utilities… Progress Energy hits new 52-week high.
Market Watch
Symbol Price
Change
52-Wk
S&P 500 1160.75 +2.1% +11.6%
Oil 36.09 +1.4% -0.3%
Gold 130.99 +2.0% +31.2%
Silver 22.34 +3.9% +36.4%
US-Dollar 78.62 +0.7% +2.5%
Euro 1.38 +1.1% -5.6%
Volatility 21.76 -7.5% -18.9%
Gold Stocks 522.36 +3.3% +27.3%
10-Year Yield 2.47 -0.4% -23.3%

World ETFs
Symbol Price
Change
52-Wk
USA 116.04 +2.0% +11.6%
Canada 28.72 +2.0% +15.7%
Russia 20.25 +1.7% +9.3%
India 37.97 +2.1% +30.1%
Israel 16.52 +2.4% +20.6%
Japan 10.03 +3.2% +4.1%
Singapore 13.62 +1.2% +30.3%
Taiwan 13.62 +0.4% +11.9%
S. Korea 55.16 +1.1% +20.3%
S. Africa 68.81 +2.4% +26.5%
China 44.27 +2.1% +9.4%
Lat.America 51.82 +2.3% +19.5%

Sector ETFs
Symbol Price
Change
52-Wk
Oil Service 114.81 +2.8% +0.7%
Big Pharma 65.35 +1.6% +0.8%
Internet 64.71 +2.7% +31.4%
Semis 13.38 +2.5% +11.1%
Utilities 31.84 +1.1% +10.4%
Defense 17.47 +2.7% +10.4%
Nanotech 9.22 +3.6% -10.1%
Alt. Energy 9.84 +2.0% -5.3%
Water 16.80 +2.9% +3.8%
Insurance 15.51 +2.2% +14.5%
Biotech 19.94 +3.7% +19.9%
Retail 17.57 +1.3% +16.4%
Software 22.77 +2.6% +19.8%
Big Tech 49.66 +2.4% +20.5%
Construction 12.15 +2.5% +3.1%
Media 12.58 +2.8% +18.9%
Consumer Svcs 61.93 +1.9% +20.6%
Financials 53.30 +2.1% +2.6%
Health Care 63.75 +1.8% +9.8%
Industrials 58.69 +2.5% +19.3%
Basic Mat 66.37 +2.9% +23.8%
Real Estate 54.29 +1.3% +30.7%
Transportation 82.43 +2.4% +21.8%
Telecom 22.22 +1.9% +20.6%