The collision of global markets and social mood

Thursday, July 7, 2011

The S&P, The Dollar, And The Schaeuble

Today should be the day the the S&P, the Nasdaq, and the Russell 2000 confirm the Dow. I'll be looking for a spot to be short, even though the action would be bullish for the near term and would suggest new highs to come. The market feels a bit stretched.

The US dollar is rallying this morning but has a lot of ground to cover before 76.59. It remains to be seen whether it shows its strength now or in the near future, but I remain steadfast in my bullishness. Not because I think it's a healthy currency (I don't). But because I see a classic supply and demand imbalance, and a massive one at that. There are simply not enough real dollars backing up the trillions of dollar credits in the global financial system.

Meanwhile, JPY, CAD, CHF, and SEK continue to suggest the dollar may be getting ready to rumble. Since being stopped out of USDCAD, I've been focusing on USDCHF and USDSEK. For the franc, I'd like to see .8525 exceeded for an impulse from the low. Failure risks retest of .8274 lows and possibly below .8250.

For the krona, I like the current action and wouldn't want to see it under the 6/5 low of 6.11. I do have a small position at 6.26 and have raised my stop to 6.30.

Yesterday, Bloomberg reported that the EU seeks to limit the big three ratings agencies, which would make me laugh if it wasn't so absurd.

German Finance Minister Wolfgang Schaeuble said the grip of the big three rating companies had to be broken when asked about Moody’s downgrade. “I have said before that we have to curb the influence of the rating agencies,” Schaeuble told reporters in Berlin today. There’s a need to “break up” the companies’ dominance, he said.

I do think these ratings agencies are idiots. They were asleep at the wheel during 2007-2008, and I think they're trying to make up for it by picking on the Europeans, but the question remains: are they correct in their assumptions? I think they are. Schaeuble seems to think they should be censored and that the gory details be kept secret.

That's government for you.

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