King Dollar

For all Buffett's followers, I guess you have read the news about him buying more American Express or Wells Fargo. If you were to ask me, I would say that he is buying more of Wells Fargo shares. Among all financials, Wells Fargo is probably standing at the top along with Goldman Sachs. The reason for the recent financial rally is also due to Wells Fargo. Credit cards don't really appeal to me especially when you have so many people in debt.

Bullish on the Dollar

This is a 20+ year weekly chart on the dollar. The bottom that shows an index of 78.43 occured in 1992. From the chart, you can actually see a strong support at index level 80 which has been broken already. I reckon that a pullback is what we are seeing right now to the 80 level. I'm bullish on dollar for short term. In the long run, we are going into uncharted territory.

So...

The line of thoughts should be straightforward from here. We look at dollar to explain oil and gold. I feel that the graph above actually explains why we have a sell off in oil recently. In the short run, we could be seeing oil at $100 as dollar begins to strengthen further.

Some analysts say that we will head towards $80. Goldman Sachs issues another report on $149 oil in the long run. Well, I think we will see $149 if we stay above $100. Given the possible upside for dollar, we are at index level of 77 now, it sounds fair to say that oil will stay above $100.

Lacklustre Indeed

Sadly, gold broke $850 and remained below it. It actually tumbled all the way to $780+ before rallying back to above $800. Similar to oil, I'm shorting gold in the short run. I have a target of $700 in mind for gold but I'm beginning to wonder if that's a huge target to reach. As of now, I shall stick to it.

I guess we are going to see a pullback in the market?

I don't think so.


We are hovering around this resistance level. This is the same as 1300 on the S&P500. A hanging man here probably doesn't provide much support for a positive stand on the market.

So, a possible reason for market downside despite dollar strength or falling oil prices, will be the financial sector. Will Lehman be taken over? How will Fannie and Freddie issue be fixed? I don't know but from what I see, I doubt it will be positive to the market. I'm still shorting Lehman. =)



Do not buy the hype from Wall St. and the press that stocks always go up. There are long periods when stocks do nothing and other investments are better.

Jim Rogers