Althought most reading this blog will be share traders as opposed to forex traders, the appreciation of the dollar has been key to success or failure over the past week.
It has long been my view that the run up in emerging market currencies, commodities and risky assets in general has been caused by seasoned hands borrowing dollars and using those to push prices in relativly thinly traded currencies and commodities. It is a well trodden path.
As the Dollar increases in value, for whatever reason, the carry is eroded and market participants will disassemble the trade and run for the door as fast as possible. The charts of copper and platinum show this has already started.
It is still my belief that the Dow Jones and all major stock indices are in the throes of a major bear market and that the rally from the early March 2009 is nothing more than a rally. I would expect a bounce soon but it looks as if the next leg down in this bear market, which will define a generation has started .
Above I show a weekly chart of the Euro $ which shows (using the Elliott wave) that the strength in the Dollar has a long way to go. On my other blog http://www.traderdavy.blogspot.com/ i have detailed the short term count on the euro$ for those traders who trade forex over a 2-3 day period. For those of you who trade intraday I publish all my trades at http://www.whichwaytoday.com/
I am hesitant to short shares at this level ,as in all probability there will be a bounce soon. Dont worry there will be plenty of trades to come . Lets just be patient and wait for them.
Have a great trading week.
