Monday May 8, 2006 - 10:36:32 GMT
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Black Swan Capital - www.blackswantrading.com
Lots of reasons to sell the $
"All through time, people have basically acted the same way in the market as a result of greed, fear, ignorance and hope - that is why the numerical formations and patterns recur on a constant basis.â€ť
This morning, an analyst was quoted on the wires as say: â€śPeople are looking for excuses to sell the dollar.â€ť Iâ€™m thinkingâ€”they ainâ€™t looking for excuses, theyâ€™ve found them:
â€˘ Another Chinese interest rate hike
â€˘ European growth (zooming alongâ€”they tell us)
â€˘ Finally a Japanese interest rate hike soon (we are told)
â€˘ A leaner meaner European Central Bank (rate hikes coming down the pike)
â€˘ Gold heading to $1,000 (probably a very low target according to what we read)
â€˘ Kinder and gentler Fed (one and done)
â€˘ Global imbalances (nice catch-all phrase; does Stephen Roach gets royalty fees when thatâ€™s said or written?)
â€˘ Emerging stock markets will rally as far as the eye can see (forget credit risk, we got swaps)
â€˘ Middle-East oil money heading into euro instead of greenbacks
â€˘ Iran/Iraq/Afghanistan/Russia/Venezuela/Nigeria (Iâ€™m sure we missed a few)
Itâ€™s hard to tell which of the above will prove true. But that doesnâ€™t matter. Itâ€™s not about the final outcome. Itâ€™s about the biases of active players along the way.
â€śThe participantsâ€™ bias is an element in determining prices and no important development leaves the participantsâ€™ bias unaffected,â€ť wrote George Soros in Alchemy of Finance.
What we have here ladies and gentlemen is a good-old self-reinforcing trend down in the dollar. Price validates belief, and price is moving with the underlying fundamentals as expected--so add to the position.
The US dollar index sliced through 8500-levelâ€¦
â€¦proving in short what we already know, the trend is your friend until the end.
Jack Crooks, Black Swan Capital
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