bear market rally in the us dollar

That’s It for This Week…
As I sign off, a glance at the screens shows that the plunge protection team must be especially hard at work, given that the DJIA is flat… this after a 300+ point drop yesterday, Sept 4, coupled with today’s news of sharply higher unemployment and mortgage foreclosures now at 30-year highs. In other news, Goldman Sachs has broken the code of silence by putting a sell on Merrill… and we have VP Cheney wandering around Eastern Europe trying to get McCain elected by reigniting a cold war with Russia.

Meanwhile, an early strong rally in gold has dissipated, leaving it just over the $800 mark as I write. Oil is down, again, looking like it might just touch the $100 mark – which is still roughly twice its low last year. No doubt the commodities are under pressure because the U.S. dollar is, once again, showing strength… up against the euro and the pound.

This is, I have to believe, little more than short-term trend trading. After all, is the economy strengthening? Is it because the Fed is on the verge of raising interest rates and by doing so, make the U.S. dollar more attractive? Is it because the euro and pound are trash? Sure. But then again, so is the dollar.

So, what to make of it? The trading herd doing what they do best, in my view… chasing markets up, then down, then up again.

Volatility is increasing, and it is going to get much worse. And the economic conditions are going to worsen, which will do the dollar no favors.

It’s just a matter of getting through the lag between perception and reality.

Until next week, thank you for reading and for subscribing