I know I've brought this point up before, but given today's action, it merits repeating: the bears have been outright cheated by what's happened in the FX market versus equities. What was supposed to have happened was equities were going to fall hard once the dollar finally got around to rising. Well (equities in blue, euro in black)…………
OK, "cheating" is too harsh a term, because the market promises us nothing. All the same, it's hard not to feel disappointed.
So what do we take away from the fact that equities have absolutely given the middle finger to a stronger dollar? What it tells me is that, given that…….
- + We have a strong year-end bullish bias;
- + An imminent short-term weakening in the dollar;
- + The "one-edged sword" we've witnessed
……..that strength in equities between now and year-end could be explosive.
I have no intention of scampering out of my existing shorts except for the one reason I will always accept: getting stopped out. I do intend to do the following, however:
- + Continue to augment strong long positions;
- + Take on a seriously large long precious metals position;
- + On the very last trading day of the year, substantially augment my best short positions (probably in the closing minutes of the trading year)
Personally, I can't wait for this year to be over, but I still need to do the very best I can every day. There are still seven trading days left, and the above is roughly what I think is in store for the balance of 2009.
