Wednesday, November 25, 2009

Dollar Falls To A New Low




Today the dollar fell to a new low for the year which is not something I welcome considering I am short the stock market. I was tempted to buy the Euro this morning as a hedge against my short stock position but decided not to initiate any new trades just prior to the holiday. The Euro has broken out of a triangle pattern which is a trade I usually take.

Considering that the dollar was down sharply today I would have expected stocks to be screaming to the upside but we simply did not see that. In fact, some of my short positions actually were flat to down on the day which I found interesting. I think the next several trading sessions will be very telling as to which way stocks are going to move but for now I am staying firm with my short positions until proven otherwise.

5 comments:

Anonymous said...

I actually felt the exact same way today. When I saw the Euro break out of that triangle, my first instinct was to cover all of my shorts (in my case, sell my puts). Interestingly enough, I was actually up slightly in all of my positions. I agree that the next few days will be quite telling. Hard to read much going into a holiday weekend. That said, in the past, I would be getting destroyed on a day like today. The fact that my positions improved slightly is actually quite encouraging.

Kevin said...

It could just mean that the big guys who are using the carry trade to buy stocks are on holiday.

Kevin

ben said...

Dollar is not always negatively correlated with S&P. This is a recent phenomenon. At some point, the correlation will break. The fundamentals of the stock market look bad but many traders can see this. As long as there are too many bears out there, the stops will be triggered and the market will go higher until the fundamentals catch up with the market. When? Nobody knows. But the fall can be swift if you have the capital and psychology to hold down to your shorts. You cannot really read anything on this thinly traded holiday market. But
it is possible that the market will shoot higher after the big players return next week based on the dollar weakness. But there is really no fundamentals that can support such a high S&P even if the S&P companies triple their earnings next January. You simply cannot borrow your way out to prosperity.

Sean said...

Kevin, I'm looking at that gap from last July ($153.25) and I'm thinking, "That's impossible!" Then I think that it might just be a scenario for a market blowoff.

At any rate, a blessed Thanksgiving to you and yours -- and thanks for one of the best blogs on the net.

Sean

Kevin said...

Thanks Sean

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