Morning all! One ETF I've been watching (and nibbling on lately) lately is UUP, Powershares DB US Dollar Bullish Fund. After dropping as a low as 21.91 just a few weeks ago on November 4th in the face of a virtually straight up equities rally, it has bounced back and rallied quite nicely against the backdrop of the EU/IMF bailout of Ireland and looming bailouts of the other "PIIGS" nations. It has risen nearly 6% since that time, closing at 23.21 this past Friday. So what happens in the short term with UUP? Does the uptrend continue as the Euro continually weakens? If so, will the inverse link between U.S. equities and the dollar continue, meaning declining stock prices while the dollar advances and vice-versa?
Or, will we see a near-term pullback as the global currency "beggar thy neighbor" race-to-the-bottom yo-yo game continues? What's in store mid and longer term for the dollar? It's pretty obvious that a weaker dollar is what the Fed and our policy-makers are aiming for with their seemingly endless rounds of "QE", but will events outside of their control (e.g. a weakening Euro in the face of ongoing sovereign crises?) actually serve to do just the opposite? After all, many commenters here and on other blogs believe that it's largely about currencies right now (and maybe ongoing sovereign debt crises). Is this really the main event that we should be watching for clues on what the rest of the markets will ultimately do?
Here are some charts of UUP:
One-week chart
One-month chart
Three-month chart
Six-month chart
One-year chart
Greece and Ireland bailed out, Portgual, Spain, and Italy remain - from the PIIGS fame.
ReplyDeleteRight now the mighty U$D looks good. China and EMs embroiled in inflation and employment reports at home(in the U.S.) starting to look good).
What about year end bonuses? Can the market and the U$D both go up at the same time?
POMO printed money has to go somewhere.
I Can
@I Can: Maybe it's going to short the equity markts? ;-)
ReplyDeleteI mean, TPTB have to decide at some point they'll collectively pull the plug again to further their own interests, right?
I think the answer to your second question appears to be "no", the market and U$D can't go up at the same time. At least not right now.
ReplyDeletePrevious lows of 117.59 SPY are right below us.
ReplyDeleteNice trade, Manny!
ReplyDeleteObviously, the currencies are all taking a beating.
ReplyDeleteForex
Forex Charts
ReplyDeleteWow, quite the sell off this morning. Reverse POMO-MOMO in effect here. Been a long time since we had a MOMO morning sell off. How long? I can't even remember the last time.
ReplyDeleteStrong support at 117.50ish going back to October.
ReplyDeleteFrom PK this morning on Spain. I'm guessing the more that countries deny they are in trouble, the more that means the ARE indeed in trouble. The kiss of death, kind of like in sports when the owner gives his coach a "vote of confidence". You know it's over when that happens.
ReplyDeletehttp://www.nytimes.com/2010/11/29/opinion/29krugman.html?_r=1&hp
New charts up.
ReplyDeleteI hope everyone had a great holiday. I was faced with a great opportunity over the weekend: see how much overtime I could put in.
ReplyDeleteLooking at the markets again, I think Mannwich is right again. He said several days ago when I was starting to go under that UUP would move higher as a result of the Euro moving down. Right on. Hope you're making money, Mannwich.
Looking at the 3LB, we haven't confirmed a downtrend yet. We may today, though.
Still looking at the best performers (when you get a pullback, the best are the ones that pullback the least), the winning sectors are clearly:
XOP Oil and gas exploration
XES Oil and gas equipment
XME Metals (mostly prescious) mining
OIH Oil service industry
KOL Coals
SMH and SOX.X semis
Big oils, like XOM, CVX, are not significantly outperforming the S&P. But the services industry, wow!
I'm not saying we should invest in the equities at this time. I'm thinking as Mannwich has said that the currencies are calling the action. Hot money is moving really fast, from currency to currency. HSBC is selling an Australian CD here for .024. Pretty good return for a CD.
So after Ireland, Spain I guess will be next. CDOs have been widening for a month.
So, without trading this chop, I will be watching the pullbacks to see where strength lies, probably in those categories I listed above.
@Rock: Just a small nibble but I'll take any wins in this environment.
ReplyDelete@Rock,
ReplyDeleteThose are very good etf's to watch. Thanks.
Correction still in progress? When will the dip buyers appear?
ReplyDelete@Manny,
ReplyDeleteWe'll know by this afternoon whether this decline will continue or the dip buyers will come in.
Morning all! Great post Manny!
ReplyDeleteSPY has been making lower highs all morning, looks like it wants to test 117.75 again.
ReplyDeleteDoesn't look like the EU is going to get an breathing room at all after bailing out Ireland. Their Greece bailout at least gave them a few months.
ReplyDeleteA question for you guys.
ReplyDeleteIt seems apparent the Feds want to push the value of the dollar down. It also seems apparent that China will follow that trend by pegging to the dollar.
If the Euro drops out completely it will of course for the short term increase the value of the dollar.
But with one of the major currency players out of the picture, what would be the long term effect on the dollar?
Would the Fed's eventually find it easier to devalue the dollar as they gain more control of it's actions or would a stronger dollar play better or something in between?
Personally I always thought the concept of the Euro was stupid and illconcieved. I do not believe it is a good choice to have both strong and weak nations with very diverse economies and culture sharing the same currency, so if the Euro does end up in the trash heap, it will get no tears from me.
Mangy Mutt
And
ReplyDeleteObama To Ice Federal Pay - President proposes freezing civilian federal employees’ pay in 2011 and 2012.
Just freeze? This isn't going to make Lou Mish very happy! Reminds me of a story my grandfather used to tell a lot. He was a life long Democrat who voted for a Democrat only once in his life - Roosevelt, and that was only the first time because "One of the first things he did was cut government pay by a quarter!". My grandfather being in the army at the time because he couldn't find a job out of high school.
Mutt - If the Euro is going away, I think it's going to be a fairly long, drawn out process. Germany and France would fight it's decline tooth and nail and those two countries have a lot of clout. I think that if the Euro does eventually fail the way a lot of economists seem to think it will, that it will be a slow process, Greece or Ireland, or Portugal would drop out first, giving the rest of the countries cover.
ReplyDeleteCorrection - my Grandfather was a life long Republican
ReplyDelete@Thor,
ReplyDeleteThe big mistake was bringing in countries like Greece who never made the cut without massive lies about their debts. The idea of the Euro was flawed in that individual countries who are accountable to no one fiscally could bring down the entire system.
Short squeeze coming?
ReplyDeleteWhen we talk about the corruption of our "leaders" over the last few decades we should be sure to include the entire world. I would argue that corruption is not only endemic in our society/government/finance, but that this is a worldwide phenomena.
ReplyDeleteHas the world always been like this? I hate to sound naive, but . . . . .
Three top Fifa men 'took bribes' NEW
Three senior Fifa officials who will vote on the 2018 and 2022 World Cup bids took bribes in the 1990s, the BBC's Panorama alleges.
@Thor,
ReplyDeleteThere was a time when no American even knew what FIFA was, our world has grown smaller and we are being made aware of more frauds.
Corruption, greed, and fraud has always been with us, but what changes over time is government's complicity and the ability to actually control it's citizens. (Mexico, Columbia, Greece, vs. China, North Korea)
The worst corruption is governmental, as they have the ability to make the laws, steal in a legalized fashion and terrorize and imprison those who seek to challenge them.
Denise (12:38) - That is a very good point.
ReplyDeleteI understand the concept of why countries would want a Euro, but in the end all the Euro countries had equal share in it's value. Not each country had equal liablities, the weaker countries benifited the most (At first)
But what happens if the people of those countries rebel against having to pay the unfair tax bill?
Mutt
@Mutt,
ReplyDeleteThe allure of one Euro currency which benefited business the most was strong, but I think that the notion that Europe could act like one big Eurozone was doomed from the start. It works well in times of prosperity, but as we have seen in times of economic decline it doesn't work.
Banksters all over the world used too much leverage, were corrupt and greedy, and even the best currencies cannot hold up during an economic meltdown.
@If The Euro Implodes:
ReplyDeleteWouldn't it be a gas if the Bernank's who run the Fed knew the Euro would tank?
If you knew this, and were running the Fed, what would you do?
To be sure, I would devalue my currency as much as possible because I would not want to see a 666 again.
Now the next question: Suppose you more than knew the Euro would tank. Suppose you had something to do with it, like encourage over-the-counter unrecorded trades of derivatives to overseas customers. Assuming you could protect your market by devaluing your currency, what would you stand to gain?. Be the last man standing, that's what. Remember you knew that China has pegged the dollar, and you knew that China has negotiated trade agreements using their Yuren Ming Bee as the trade vehicle. What better way to absolutely screw China and their trading partners?
It's almost as beautiful as the Battle of Midway.
So in the end, does the Fed become the world's central bank?
The solution for Euroland is to restructure sovereign debts. Will hurt European banks badly, as we've seen they are the main holders of this debt. Then nationalize the few banks that would still be worth something (if any). And judge the main parties involved in creating this dysfunctional mess, to determine whether they are just guilty of utter incompetence, or criminal charges.
ReplyDeleteWill hurt the people, but in the long run that may be the only way to a healthy new beginning for the EU.
Mainwhile, I'm still waiting for an opportunity to go long at 1150 or maybe earlier at 1165. Either way, love to see red back for some time.
ReplyDeleteRock - You have a devious mind to have thought that through in such a way.
ReplyDeleteThe scary thing is, what if that was/is the plan.
Heck that ought to be good for some thought.
Mutt
Mini short squeeze. Buyers are back, at least temporarily.
ReplyDeleteWolfie - I agree! I also think that the US is a couple of years behind the EU in this whole mess. It's coming to a head there sooner, but our day of reckoning is not too far behind.
ReplyDeleteDip buyers dipping toes in?
ReplyDeleteRock - Also agree! I wouldn't be at all surprised if part of what's going on is an attempt to punish China's currency peg by forcing them to deal with their own internal inflation caused by the peg.
ReplyDeleteNice trend line break to the upside.
ReplyDeleteHas AG E. Holder finally woken up from his deep slumber? I mean, shit, it's only been several YEARS since all of this crap went down and only now do the START a criminal investigation? I'm sure any charges will stop WELL short of anyone of significant in the TBTF firms and will find the Enron-style scapegoats so that we can all calm down in knowing that all the bad guys have been rooted out and the system is now "sound" again for the Sheeple to buy equities.
ReplyDeletehttp://www.zerohedge.com/article/ag-eric-holder-launches-criminal-probe-wall-street
Am tempted to nibble on some more UUP on any decent pullbacks.
ReplyDeleteManny - Maybe the Big O finally figured out that no matter how much he panders to them, the "businesses" in this country are never going to be supportive of him. The Chamber of Commerce is seeing to that.
ReplyDeleteWay to use your Ivy League education buddy!
@Manny,
ReplyDeleteWe are now entering the next election cycle, 2012. The Obama administration needs to show it can be tough on Wall Street, and this could go hand in hand with the other investigations.
Criminal? I will believe it when I see ANY of those responsible being forced to do a perp walk complete with handcuffs, instead of just paying a little fine and admitting no guilt.
Denise, Amen to that, when I think of all the people serving time in America's prisons and jails over petty drug offenses. . . .
ReplyDeleteFrom an article in the UK Guardian
ReplyDeleteBrian Lucey, associate professor of finance at Trinity College Dublin was "stunned" at the cash poured in: "We've already put at least €32bn into them, so that's going to be €67bn, which is 50% of GNP, that's a world record". He also warned that a new government next year could rip up the deal. "Sovereign governments have a right to effectively do whatever they want," he said.
Emphasis mine . . . wouldn't that throw a wrench into things?
Or not emphasis mine . . .I tried to bold the He also warned that a new government next year could rip up the deal.
ReplyDeleteThor - I thought you were a computer nerd :)
ReplyDeleteHopefully this will work. To use Bold put in an open bracket (Without parethesis) "<" then a "b" then a closed bracket ">" then type or paste in your text after the text you want bolded is in, but before the text you do not want bolded put in anouther open bracket "<" then a forward slash "/" another "b" then closed bracket ">"
I hope that makes sense and helps
Mangy Mutt
I thought this was good. It seems to me that bankers in Germany DO indeed bear some responsibility for the crisis in Europe. Why aren't THEY being asked to sacrifice anything? After all, they were the foolish ones who lent the money in the first place.
ReplyDeletehttp://www.nakedcapitalism.com/2010/11/marshall-auerback-bankers-gone-wild-in-ireland-and-germany.html
Manny - Very good article! I'm always struck by the "the lady doth protest too much" mentality. Wasn't it Sarkozy who said that this whole mess was an Anglo Saxon problem?
ReplyDeleteMutt - ayup, I got that, just not sure how to bold something within something that's already been italicized :-)
I would dub this mess a "human" (stupidity and greed) problem. Sprinkle in technology and it becomes amplified.
ReplyDeleteThor - I am not sure how to bold something in italized either but will give it a try this is italized this is bold Will this be bold italized?
ReplyDeleteThor - use both the i & the b in seperate brackets for the open and the closed There might be a cleaner way of doing it but this seems to work
Mutt
Mutt - Hrmm. You're clearly a more competent IT Professional than I am ;-)
ReplyDeleteheehee.
Thor - I am just more of a dumbass then you, although I would not mind become a Professional Dumbass
ReplyDeleteI wonder if that pays well...
Mutt
Manny - Interesting back and forth between you and BR. I think you hit the nail on the head, he's talking his book. I think he's gone way long. We'll see how things end up but I don't think we're going to see quite the recovery he's expecting.I think we stay about where we're at right now with slightly improving unemployment numbers until the next recession, which I also think will come sooner than the 6 -7 years between the last two.
ReplyDelete@Thor: Yeah, I get what BR is saying but my point is how is pumping stocks NOW really any different than those charlatans in real estate that were pumping housing back in the '04-'06 period? I fail to see the difference. Both are pure bullshit, and much of it of the fraudulent (and definitely distorted) variety, in my mind.
ReplyDeleteManny - Yup. I'll also be curious to see whether or not some of these people like BR will actually be able to survive in a market not being held up by the fed? Kind of like the .com mania up in SF. Anyone and their mother who even knew what a computer was (never mind knew how to use one) was a VP of Web something or other. So much shit floating to the top, once the bubble popped, we were back to sanity for many of these folks. Same for all the house flippers during the housing bubble.
ReplyDeleteI'm not saying BR isn't a great investment guy, just that I doubt very much the skills he and his people use to trade this market are going to be of much use 5 or 10 years from now. Pretty easy to make money for some of these people with all the fed money floating around. Ride that bubble on up. The true talent will still be making money when it's all over.
Hence my comment there that I hope that everyone can get out in time when the next sucker blows. This thing will blow again when the TBTF's and Hedgies decide they can't pump this thing upward anymore. Then it's Katy Bar the Door on the casino time. Again. It's really an absurd way to run country's financial system.
ReplyDeleteManny - do you think that they're going to pull it all away on purpose? I think that they're doing all this pumping in an attempt to jump start the economy and that when they finally do pull the plug, it will be because they are out of options. Like inflation starts taking off, or no amount of QE gets the pumps primed. . .
ReplyDeleteI can't imagine TBTB would be consciously trying to reflate just so the wealthy can recover. . . there aren't enough wealthy people in the world, or places for them to hide, should everything fall apart for everyone but the wealthy...
@Thor: My point is the big players always decide where the markets are going to go and those players are now bigger and more powerful than ever, so they'll ultimately decide how long this rally will go, regardless of said fundamentals. When it suits them to make money taking the other side (likely after they've sucked in as much retail $$ as they can just like the prior two bubbles) or selling gradma down the river, they'll do that when "the time is right" too.
ReplyDeleteWikiLeaks to target "big U.S. bank" next in early '11. This thing is FAR from over.
ReplyDeletehttp://www.zerohedge.com/article/wikileaks-next-target-big-us-bank
Manny - about time! It took Asange long enough to figure out that nothing he could ever produce with regard to the governments or the military of the world was ever going to change anything in the world. All the true power lies in the financial capitals.
ReplyDeleteA must read for anyone who thinks Apple isn't five steps ahead in the tech chess game.
ReplyDeletehttp://www.asymco.com/2010/11/29/the-iphone-is-not-superfluous-not-easily-copied-not-revolutionary-and-not-a-premium-product/
Thor and Manny...your 6:30 and 6:36 posts...just make sure you've always got some puts on.
ReplyDeleteGreg - Good article too. Absolutely a game changer.
ReplyDeleteSome of my favorite new apps - Walgreens, three clicks to refill my prescriptions - one to open the app, one to select the prescription I want filled, and one to confirm.
TuneIn Radio - Pretty much any radio station on the planet is in here. BBC Radio, NPR from any city in the country, dance music from all over Europe and South America.
I'll say it over and over, it's not the best phone I've had, but I could never give this thing up, I'm way too dependent on too many apps.
oh! and the Map feature is unbeatable. Looking for Pizza Hutt? Just open up the map and type in Pizza Hut - same for any business in your area, Target, Walmart, Petco. Then tap on the number and call. I think Google is handling all the information on that though, so the company isn't entirely useless.
ReplyDeleteWolfie, I'm teasing you btw ;-)
It's supposed to get down into the 30's here tonight. Manny, I think we're going to get your winter again :-(
ReplyDeleteThor,
ReplyDeleteManny's winter is about 30 below zero! People in Minnesota are still wearing shorts and sandals in the 30's. :-)
I don't know how you people do it. I had to put on a jacket today!
ReplyDeleteOMG! A jacket! Poor thing. It has been gloomy and raining here since noon. But weather.com says it is 48 here right now and the front covers from Wisconsin to Louisiana!
ReplyDeleteThor - I am feeling reaaaallll badly for you. Do you even own a winter jacket :)
ReplyDelete30 degrees is starting to be cold and as long as the wind is not blowing it is not too bad, heck Mannwich would probably even agree that minus 30 without wind is do able.
Not to worry though next week it will be back to 72 degrees for you.
Mutt
Mutt - hah, yes I do own a winter jacket actually. To be honest, I bought it in Iceland. I wore it today because it was really cold when I left for work (57!) but sadly, it was too hot :-)
ReplyDelete