dollar

[Don’t look too closely or you’ll see that, when the Fed makes loans to banks, it is a cheap parlor trick that involves neither actual money nor any real lending. In the guest commentary below, Robert Moore, a frequent contributor to the Rick’s Picks forum, explains what is really going on. RA] What is the difference between counterfeiting and lending? The Merriam Webster dictionary defines the noun “loan” as follows: 1) Money lent at interest; 2) Something lent for the borrowers temporary use; 3) The grant of temporary use. A loan typically involves an asset that is idle (like spare money, a spare house, or a spare shovel) which someone else can put into economic use; and the rent typically comprises compensation for said use. Rents typically cover wear and tear (if the real asset is a durable good), or are offered as a premium or share of generated profits, paid in good intention for the purpose of showing your appreciation for the lender’s generosity in extending their financial asset for your use. But definition number one above is the one I want to focus on here: money lent at interest. Recently, the wheels seemingly fell off the wagon with that one, because, since early 2009, the Federal Reserve has been “lending” money to large commercial and foreign banks at effectively 0% interest. Why is this important? Look again at the definitions above. If the loan is money, but without interest (which a 0% rate certainly implies), then the lender’s motive behind the loan must be “for the borrower’s temporary use”- meaning that the Fed must be expecting the banks to return the money at some point; otherwise, the “loan” becomes a gift. Now, for a moment, just imagine that your neighbor stops by on a warm Saturday afternoon and

Doug McLagan and I were on the same, bullish track when we posted, respectively, bullish touts for the December Dollar and the NYBOT Dollar Index. Note that this is corroborated by the improving outlook for the December T-Bond. Some may have given it up for dead, but it has moved within easy distance of a peak1 whose breach would create a powerful impulse leg on the hourly chart.

T-Bond futures have already broken down beneath late September's lows, but it remains uncertain whether the Dollar Index is about to do the same.  If so, it will lend further buoyancy to stocks, crude and precious metals; if not, we should see the dollar's rebound gain momentum over the next 2-3 days.

The dollar's strength has been weighing down everything but T-Bonds, so I've provided a chart with today's DXY tout that shows why we shouldn't expect the uptrend to die below 80. I've also spelled out what it would take for the Dollar Index to demonstrate conclusively that a bull market is under way.

The dollar looks primed to move significantly higher, implying that U.S. stocks and precious metals will remain under pressure for the foreseeable future. That doesn’t necessarily mean Gold and Silver cannot continue to rise against all currencies nonetheless, since the global monetary blowout that has caused them to ascend for more than a decade shows no sign of abating. However, whatever strength bullion musters in the weeks and months ahead will in dollar terms be tempered at least somewhat by a resurgent buck. We recently called subscribers’ attention to a possible nascent bull market in the dollar via a trading “tout” that recommended setting a chart alert at 78.87, about 0.6 percent above where the NYBOT Dollar Index was trading at the time. Yesterday, the  Index spiked to within 3 cents of that benchmark, so officially the baby bull has not yet been born.  However, during an online tutorial session that we conduct every Wednesday morning, we had a powerful sense of déjà vu yesterday while looking at an hourly chart of the Dollar Index. (Want to be alerted in real time to these changes? Click here for a free trial subscription to Rick’s Picks, including access to a chat room that goes ‘round-the-clock, and to trading recommendations and analysis that are continually updated during market hours.)  The chart is reproduced above. The crucial piece of it, based on our proprietary Hidden Pivot Method, is the 77.52 peak achieved during Monday morning’s spike-up opening. Notice how that peak slightly exceeded an earlier one at 77.49, creating on the hourly chart what Hidden Pivot-eers  call a bullish "impulse leg.” The implication is that any pullback such as the one that occurred yesterday represents a buying opportunity.  As for our feeling of deja vu, the price pattern on the dollar's hourly chart

Ah, what a day!  Even George Soros has decided to throw in the towel, so difficult has it become to find a winner one can stick with and still satisfy the regulators. The $25 billion that Soros had working in the markets returned just 2.5% last year and has lost 6% so far this year.  Judging from the numbers, it’s probably safe to say that he’s been underweighted in bullion. Very underweighted. But why?  Does he perhaps know something that Rick’s Picks readers do not?  Hard to say just what that would be, since the fundamentals that have been pushing gold higher were cemented in place when the Federal Reserve System was created in 1913.  Soros doesn’t strike us as the kind of guy who would be unmindful of the dollar’s 95% depreciation since then – especially since some of his biggest scores have been leveraged bets against various currencies. And what easier bet could there be than to pile up ingots against the day when the most endangered currency of them all receives its coup de grace? We don’t imagine he would have been socking it all away in real estate. Even a fool can see not only that real estate prices, both commercial and residential, are being propped up by government bailouts, Fed sleight-of-hand and malfeasant accounting, but that they still have a long way to fall. Not the kind of thing that would interest someone as savvy as Soros. Anyway, we don’t envy him the task of managing all of his billions privately, since one false move could wipe out 20% of his net worth overnight. Imagine the stresses of having to keep jockeying huge sums of cash around when it’s an absolute given that only the bold contrarian will win in the end.  Not that we

I'll be tracking the dollar more closely than usual in the days and weeks ahead, since we wouldn't want a major bull move to get started in plain sight without suspecting it. The rally so far has been unimpressive, stalling at some minor resistance points before pulling back for another charge.

Gold and silver had gotten sacked earlier in the week so we took a close look at their respective charts to see whether there were any signs that the weakness might start to snowball. In fact, the most bearish technical evidence we turned up hinted only of short-lived strength in the dollar. Even this had to be qualified, however, since the rally in the dollar was proceeding from an A-B impulse leg with a fatal flaw. Check out this video if you want to see how even minor pieces of technical evidence can give one a confident grasp of the big picture.