Tuesday, July 19, 2016

3 Reasons Why The Dollar May Break Out: A Building Sign Of Stock Market Risk

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*Typically the dollar is a sign for bullish US market moves.
*We think that post-Brexit a strong dollar is a sign of worry.
*Since Brexit the dollar has been indecisive. It may have just picked a side.
*A dollar move has global implications.
A strong dollar is typically associated with strong US markets which then spillover to the rest of the world. A weak dollar has coincided with down US markets. Post-Brexit we think a strong dollar shows signs of a flight to safety and may foreshadow risk. To this point the dollar has been indecisive since Brexit but may have just made up its mind. Such a move has global implications.
Here's a chart of the euro (NYSEARCA:FXE) versus the US dollar (NYSEARCA:UUP). We think this is the most important chart today to understand markets.
Above you see the euro versus the dollar (chart down means strong dollar). Since Brexit on June 24th the dollar has been back and forth. We are using the dollar to hint to risk or safety. If the dollar is strong we think it's a sign of a flight to quality. If the dollar is weak it is a sign of confidence in home currencies around the world.
The dollar may be trying for another breakout.
While the dollar has clearly been range-bound, it may be trying to break out. (down on the chart is up for the dollar; a breakout)
We think it would make sense that the dollar breaks out now for three reasons.
1) Japan is out of bullets.
Japan had a meeting with Ben Bernanke to see what other avenues they can take to liquefy their economy. They are out of bullets. It has been reported that their binge of bond buying is ending because there are no more sellers. They've cornered the market. That said the government has said they wantto accelerate this process.



Chaim Siegel has been working with hedge funds and mutual funds as an analyst and PM his entire career. Chaim specializes in earnings and predicts, analyzes and reacts to earnings and earnings events as well as developing current company stories with a hedge fund perspective. If you want his analysis real time sign up to the right for real time email alerts. #in, $spy, $qqq, $iwm, $vxx, $ycs, $fxe, $EUO, $YCS, ^GSPC, INDEXSP:.INX, #elazaradvisorsllc, CME Globex: ES Disclosure: These trades can lose you money and principal especially when using leverage BY USING THIS SITE YOU AGREE TO TAKE ALL RESPONSIBILITY FOR YOUR OUTCOMES AND LOSSES AND HOLD BESTIDEAS, ITS CONTRIBUTORS AND ELAZAR ADVISORS, LLC HARMLESS