Trader Scott’s Market Blog
September 29, 2016
There are two stories on Zero Hedge today referring to the US Dollar ($). Thisone and this one are both basically about a serious situation in the world. The situation discussed is the shortage of ($s), as ridiculous as that initially sounds. But what there certainly is no shortage of, isfolks who have been trying to scare all of us for YEARS that the $ is on the verge of collapse and that gold is going to the moon. The folks who have “predicted” this are usually trying to get to your wallet. Although he sells gold coins for a living, Andrew Gause has for years debunked these clowns (my description, I don’t speak for Andrew) on the Real World of Money, who have incessantly repeated their failed predictions. They even make Nostradamus look sane.
I have stated many times that I have a big long INVESTMENT position (for now) in $s. I also have a big long INVESTMENT position in PMs. Contrary to popular opinion, gold and the $ can rise (or fall) together for quite awhile. Over the very long term, they certainly are inversely correlated. But I never (purposely) use INVESTMENTS as a hedge. I only hedge relatively short term and I am very proactive with those hedges.
So the $ shortage situation is going to continue to tighten. The Deutsche Bank (and most European banks and American banks) situation is going to continue to affect that shortage. But there are a lot of other reasons for the shortage. As to the Deutsche bank situation specifically, the brilliant Angela Merkel has said there will be no bailout. I expect the markets will force her to cave on that one. And a temporary resolution on that one is coming soon and also a temporary rally will follow.But that will not change the situation. There is tremendous upward pressure on the $ globally and the policymakers are aware of this. One way to alleviate that pressure is by the selling of US Treasuries. But the only way to truly alleviate the pressure is by a rally in the $. I have attached a weekly and a daily chart of the $. I believe the TREND in the $ is up. We are currently in a TRADING RANGE trying to build the energy necessary to break thru the RESISTANCE area drawn in. But I always want to be prepared to enter a position if the opportunity arises. And since I believe the $ is in an UPTREND, I want to buy at/below SUPPORT if that opportunity arises. It’s currently in the middle of the TRADING RANGE. I never enter a position in the middle of a RANGE, no matter how bullish or bearish that I am. I will reassess my outlook for the $ if/when we get to the first RESISTANCE area, which is the top of the RANGE at about 100.5 on the US $ Index.
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Trader Scott has been involved with markets for over twenty years. Initially he was an individual floor trader and member of the Midwest Stock Exchange, which then led to a much better opportunity at the Chicago Board Options Exchange. By his early 30’s, he had become very successful in markets, but a health situation caused him to back away from the grind of being a full time floor trader. During this time away from markets, Scott was completely focused on educating himself about true overall health and natural healing which remains a passion to this day.Scott returned to markets over fifteen years ago where he continues as an independent trader.
September 30, 2016 @ 1:32 am Dmitrii
How do you have a big long investment position in $s? Through cash or some ETF?
September 30, 2016 @ 2:06 am traderscott
In lots of cash instruments , ETFs and long term Government Bonds Dimitrii. If there is enough weakness into support, I’ll do more volatile ETFs only.
September 30, 2016 @ 11:28 am Matt Ryan
Scott. Thanks for the tremendous insight. How do you feel about a mixed Muni bond portfolio…
October 1, 2016 @ 10:27 am traderscott
Matt, I am extremely concerned about the long term prospects for all global debt markets (especially government debt). If you own them currently, you might be able to squeak another 12ish months out of it. But for new money now, I believe that would not be wise.
September 30, 2016 @ 9:26 am Randal Magnuson
It looks like you use the support/resistance… entry/exit strategy as one of the primary ways to manage risk, correct? So you don’t lose money in the volatility….? Thanks foe the posts…
October 1, 2016 @ 10:24 am traderscott
Correct Randal, the more tested/proven (to ourselves) tools we employ to cut our RISK and increase our PROBABILITIES will keep upping our performance. Understanding the TREND of the market and how to use SUPPORT/RESISTANCE are two of the best (for me they are the best).
September 30, 2016 @ 7:29 pm harold
Is not PM A viable alternate to cash?
September 30, 2016 @ 7:32 pm traderscott
They are two separate assets Harold. When an asset is truly “on sale” like gold in December 2015,(check my archives), then I move from cash to that asset.
October 1, 2016 @ 8:21 am Chartsmaster
The charts of the USD look like a massave top. I don’t believe the USD will get much above 96. How do you have a shortage of dollars when the government keeps spending at deficit levels and the FED keeps printing? The numbers keep increasing exponentially. There is no limitation, no shortage. Maybe in the very short term, technical situations such as securities settlement or treasury issuance you have technical shortages. There is no possibility of a USD shortage unless the government goes back to backing the dollar with gold or silver.
October 1, 2016 @ 7:29 pm traderscott
October 1, 2016 @ 1:37 pm Bill Fee
You are young ,,, great ! I will take the gold and you keep the change ! Thank you !