Many traders like to pick my brain and/or share information with me on a daily basis. A much-respected colleague of mine shared this information with me. Like me, he sees no reason why equities should be as strong as they are. I tell you now; it is all about the US Dollar.
Almost every worldwide commodity from Oil to Gold to Corn to Coffee are traded in US Dollars. The US Dollar is considered a safe haven currency. If the US Dollar fails as a credible currency, the rest of the world goes down with it. This thought process has kept US stocks and treasuries attractive to foreign investors for years. When you invest in the USA you invest in stability. Moreover, you can do SIZE.
With instability worldwide, foreign capital has poured into the US stock and treasury markets. Two months ago, when the Dollar vs. the Euro Currency was 1.04, the S&P 500 was 800. Simple division gives us a ratio of 756/1. With the currency rates at 1.15 and the S&P at 940 the ratio is 817/1. Even with the drop in the value of the dollar, the foreign investor is realizing a small profit in his US held assets. As long as the dollar continues to falter, US stocks and treasuries will look attractive to foreign investors. The shorts in the stock market will continue to be squeezed.
Technically speaking the SPM could easily reach 1000 and possibly 1100 before the next 2-3 year leg down begins. There is a reason why stocks will not sit down. The weak dollar may be it.
Almost every worldwide commodity from Oil to Gold to Corn to Coffee are traded in US Dollars. The US Dollar is considered a safe haven currency. If the US Dollar fails as a credible currency, the rest of the world goes down with it. This thought process has kept US stocks and treasuries attractive to foreign investors for years. When you invest in the USA you invest in stability. Moreover, you can do SIZE.
With instability worldwide, foreign capital has poured into the US stock and treasury markets. Two months ago, when the Dollar vs. the Euro Currency was 1.04, the S&P 500 was 800. Simple division gives us a ratio of 756/1. With the currency rates at 1.15 and the S&P at 940 the ratio is 817/1. Even with the drop in the value of the dollar, the foreign investor is realizing a small profit in his US held assets. As long as the dollar continues to falter, US stocks and treasuries will look attractive to foreign investors. The shorts in the stock market will continue to be squeezed.
Technically speaking the SPM could easily reach 1000 and possibly 1100 before the next 2-3 year leg down begins. There is a reason why stocks will not sit down. The weak dollar may be it.
