Crude oil breakout at $81.70, USDX at 75.04
Crude has had a incredible run the past 2 weeks. Dollar weakness continues as everyone and their mother is short the USD. Near term USD can fall even lower as downward momentum is very strong. Contrarians beware the strength of momentum as it can run for longer then expected. Contrarians have been calling for a dollar reversal but perhaps the new normal calls for the USDX to hang around the sub 70 level. Ive read that the policymakers wish for the dollar to hang around the 62-67 level.
Short term there can be a reversal if there is short covering rally. For trading purposes this is dangerous time to play with oil/USD. Im watching from the sidelines.
Intermediate term the USD falls lower as deficits and QE continues with MBS purchases and Treasury buybacks.
The fact of the matter is that 65% of the world’s wealth is priced in dollars and thus a viable alternative is not possible at the present time. As a result the US policymakers are telling the world to “deal with the lower dollar”. The US is using its reserve currency status as a gun as there is nothing foreign nations can do at the present time but to take the abuse.
On a personal note I got squeezed with DTO as i didnt expect this quick of a run. Had to pull out and am licking my wounds still. Not to bad of a haircut but the contrarian in me caused this grrr.
bearmarkettrader I know the pain…….
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I sold my USO & jumped back into the FAZ, SDS & QID today. Probably a mistake but it is fun to play. I never hold these too long anyway but the action in the market today moved oddly I thought. We shall see tomorrow.