The Return of the Almighty Dollar

When the housing crisis morphed into the credit crises in 2008, many of my fellow Americans—and the world—lamented about the decline of the United States as a world power. Flash forward six years later and the script has flipped. The good ol’ U.S. of A is once again viewed as a paragon of economic strength as emerging markets have struggled (think Russia, Brazil and China) and political crises in Eastern Europe, the Middle East and Africa have reignited talk of “flight to quality.”

Yet all the big talk has failed to generate America buying in the first quarter. Although the U.S. stock market has climbed above all-time highs, the market hasn’t maintained last year’s pace.

The dollar has fared worse as the U.S. Dollar Index has lost almost one percent in the first quarter, all despite the Fed’s ongoing tapering program and hints at rising interest rates as early as next year.

From a technical perspective the dollar index has built a strong, multi-year base below 80. Since November 2010 when the index hit 78, the U.S. dollar index has tested the 78-79 range at least six times and failed to break through (see the red line below).

The U.S. Dollar Index Weekly Front-Month Chart

The U.S. Dollar Index Weekly Front-Month Chart

Long term, buying the dollar index looks like a low-risk, high reward trade with a stop below the trendline—should the U.S. economy continue to chug along. After the latest fed press conference a few weeks ago, the dollar index shot up above 80 after bottoming around 79.3 on March 10. Now maybe as good a time as any to jump in on the long side.

Although the dollar index looks attractive, maintain flexibility. If things change unexpectedly, a break below 79 represents an excellent short opportunity.

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Where I’ve Been

It has been months, January 29 to be exact, since I last updated this blog. It’s time to explain where I’ve been and what I’ve been up to. Originally, when I accepted a new position at R/West Marketing, I planned to update this blog once a week. That has not happened and I apologize.

Transitioning back to full-time work has been rewarding but also tiring. There is only so much time I can sit in front of a computer without driving myself (and my wife) crazy. At the same time, my wife has made a job change as well. Last month she accepted an offer that has moved us from the Willamette Valley to the high desert of Central Oregon.

With my new location I’ve debated changing the name of this blog to the “High Desert Trader” to reflect my new surroundings. In the end, I’ve decided to keep it “Rip City Trader.” Although I no longer live in Portland, it will always be my hometown.

And now that we have settled into our new residence, I vow to maintain my pledge to blog at least once a week beginning now. My hope is that my once growing audience returns and we can resume the verbal scrum between bulls and bears in the world’s futures markets.

Despite the massive changes in my life these past few months, I have continued to trade with my attention squarely upon palladium. It’s a market I’ve been watching for a while that experienced an impressive multi-year breakout from consolidation a few weeks ago. Thanks to a perfect storm of fundamental and technical phenomena, palladium looks like the trade of the year. As events unfold in key mining countries, South Africa and Russia, as well as the global economy, I’ll keep you updated with technical analysis mixed in for good measure. Although I like to debate the merits of fundamentals, at the end of the day I am a technical trader and base my trading system upon technical analysis.

Stay tuned for my next blog post soon…it covers another market that I’m excited about both from a fundamental and technical perspective that presents another potentially profitable opportunity. 🙂