Dollar Index (DXY; last: 84.32)

major-top-is-in-in-dxyTwo weeks ago, I posted a 90.26 target for the Dollar Index without considering its potential importance.  Because this target was six months in coming and encompassed half of the dollar’s bear rally from the March 2008 bottom, I probably should have drum-rolled and billboarded it;  instead, I noted merely that a move past the target would telegraph more upside amounting to as much as 5%.  DXY ultimately topped within 0.6 points of the target, and in retrospect it’s logical to infer that the bear rally may be spent. This means the dollar’s major trend will likely be down for the foreseeable future.  There is one caveat that should be noted, however:  If and when speculators test the Fed’s ostensibly unlimited bid for Treasurys, creating a long squeeze on U.S. bonds, this could cause the dollar to spike. The reason is that dollars will be temporarily shifting out of vehicles that are heavily leveraged as collateral and into hard-cash liquidity.