Investing.com - Financial Markets Worldwide

Dollar Hollers Like A Bear

Published 11/01/2013, 02:26 PM
Updated 07/09/2023, 06:31 AM
ES35
0.87%
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The US dollar index hit the relief valve around its 50% retracement level -- launching the index some 2% higher for the week. Although it's rattled the already fragile resolve of the commodity markets and asset sectors closely tied to it, we view the move as representative of a classic bear market rally. We also see it as another opportunity to rebalance positions that should outperform -- as we expect the fast move in the dollar to reverse lower over the next few weeks.
The U.S. Dollar Index
The Australian dollar continues to work its way down the retracement profile of its historic waterfall decline from 2008 and 2009.
The AUD
As was the case in 2009, we would expect those leading reflationary proxies like silver, to begin outperforming as the Aussie completes its retracement contractual agreements.
The AUD And Silver
Silver
The bigger picture, and one that we have not viewed as bearish toward risk appetites in general -- is that the torch is now being passed back from the US to those regions that have underperformed over the past few years -- and that have stoked world-wide growth and reflationary trends higher.
U.S. vs. Emerging Markets
Since this summer we have preferred emerging equity markets versus the SPX and see no reason to shift that posture.
Emerging Markets: Then And Now
Although the Shanghai Composite Index has been rejected by overhead resistance recently -- we anticipate the next drive higher to break through.
The Shanghai Composite: Weekly
The Shanghai Composite: Daily
We still like Europe, namely Spain -- but as shown below in our IBEX comparative from this summer -- the lion's share of the breakout leg has been captured. We anticipate emerging markets and China to outperform over an intermediate time-frame (~ 3-6 months).
Spain's IBEX

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