I haven’t posted on this blog for several days. There has been much news, but volume is declining going into the end of the year, and in my experience any technical signal generated at this time of year can get quickly reversed, especially in this record volatility environment. So I mostly just watch the markets and will await patiently for more clarity. The chart to the left shows the weekly US Dollar index. You can see how this nice uptrend came to a quick end with the Treasury and Fed’s inept handling of the financial situation. It would have been an interesting experiment to see if market forces would have been able to cleanse the system and eventually create a sound footing for the economy. Instead we must repeat mistakes of the past, and hope for a different outcome. Normally that is the definition of insanity, but it appears it is now economic policy. If companies produce products that people don’t want to buy, they should not be bailed out so they can stay in business to continue producing undesireable products. If labor unions are allowed to strangle companies then something should be done about the unions. If consumers don’t understand what they are signing when they take out a loan, that should be their responsibility. Etc., Etc. Why is there this mentality that failure is not allowed or tolerated? That the government is they to bail us out when we fail? The government should insure that the sytem is fair, but they should understand that there is risk and reward, and sometimes with risk there is loss rather than reward. That’s a natural process and any attempt to smooth out that process has larger consequences. Now we have billions going down the drain, with interest rates near zero. Didn’t we learn from the Japanese with near zero interst rates? Didn’t low interest help create this mess a few years ago. Don’t they care about the dollar resuming a plunge that will create more commodity bubbles and rampant inflation down the road. Are they now going to bail out retirees living on a fixed income? It is unbelievable that a Republican administration is nationalizing so much of our economy. At this rate Obama’s going to look like a conservative by time he is sworn into office. It is shameful.
The dollar has lost have the gain of the recent rally, just in the last couple of weeks. So far the weekly chart has held the blue moving average line, and is finding support in the fibonacci retracement zone. And the momentum indicator is getting oversold. There is still some hope that the nice, steady rally will resume. But with the jokers in the Treasury and Fed, I won’t be surprised if the entire rally is retraced. The Japanese yen has been the strongest currency lately making new high. The Euro has gained much less on the dollar, as they are also dealing with many financial problems. It is curioius how oil is still in a steep decline despite the drop in the dollar and efforts to curb production. Gold started to rally with the decline in the dollar, but looks to be on the verge of faltering. It is a weird time in the markets.
Stock indexes have attempted to rally off the recent lows, but have not been able to make up much ground. Taking a step back and looking at the weekly chart reveals a more discouraging picture. The downtrend looks intact, with momentum now moving into the overbought zone. The daily trend looks like it is trying to turn up, but not in a convincing way. I would give more weight to the weekly chart. If momentum should turn back down there could easily be another impulse move south.
One of the advertisers on this blog sent this link to post. It is a short video discussing the market environment at this time of year. It is worth viewing. Click here to view video.