Now that we get a breather from Doom until October 21 or so, I can safely run some MRO charts to see what's coming up in the next week or two in the "Great Bet Against The Dollar" investment boom!
First of all, I think it's absolutely rotten to the core to be placed in the position where one cannot be an "investor" but has to make financial decisions based on betting against the monetary policy of the country in which you live. It's a killer for older people and those on fixed incomes (government checks or not) because any savings these people have can no longer just be placed at a minimal risk for a nominal return.
ZIRP has insured that with the current real rate of inflation now cruising along at better than 6% (curtesy of John Williams' Shadow Stats), not betting against the dollar is a sure way to loose your nest egg.
That, in turn, forces a person to be a speculator rather than an investor which is where older people who feel they cannot take risks with what savings they have really get their hair clipped.
Remember, in the charts that follow, the red line is the MRO itself, the green verticals are "strength/buy" signals and the orange verticals are the "weakness/sell" signals.
So let's see what the short and medium term MRO (Market Reversal Oscillator) has to say about the weeks upcoming.
After posting a short rally following the general statements from Grand Poobahs at the Federal Reserve, the MRO has now turned up and is throwing off "weakness/sell" signals again. The only time since July of 2010 where we got "strength/buy" signals have been very short turn technical short rallies and we may indeed be finishing up a little stronger one now.
At any rate, the MRO's verdict on the $$ is weak to bearish and we are taking advantage by short term bets against it.
If the dollar is going to get weaker again (and I see no way it can't), then some other items should confirm it such as gold, silver and foreign currencies starting to strengthen..
First we look at gold, using GLD as my tradable proxy for the metal.
Following the "weakness/sell" generated back the first of May (when the Fed nixed QE II), it has, as of Friday, tossed off a new "strength/buy" signal as the 5DMA bounced off the accelerated uptrend and the MRO rolled over the top and started down.
At a minimum, this is a confirmation of the markets starting to call "Phooey!" on the Fed's monetary stance and at most, the signal of a "get on board" call for more upside potential. We will re-establish partial small trading positions in GLD on Monday. (see Weekly GLD below)
Just to make sure, let's look at a longer term outlook on gold in the form of GLD using weekly data to generate MRO signals.
The weekly chart is not so cheerful - yet.. As you can see in the Notes, the MRO is locked in below zero - staying there most of the time and when reactions do happen, they are short and of very little consequence and a fresh "strength/buy" is issued shortly thereafter.
So you see large dips below zero (bullish) and very short excursions above zero. Plus, GLD is trading strongly above its' long term trend that goes back to Nov. 2008. On this chart, the only fly in the ointment is that the MRO has rolled under, the %R has turned down and if the 5DMA rolls over and starts down, we'll get a longer period of weakness and will have to insure GLD doesn't break its' uptrend before committing larger and longer term trades.
Let's see what silver has to say about the situation.
Silver (plotted here as SLV, out tradable ETF for silver) has taken a good whop along side the head. It initially threw off a hard Sell back the first of May, dropped through its' accelerated uptrend and as of Friday, the MRO threw off an initial "strength/buy" signal as SLV started loosing downside momentum only two weeks after the crunch. Please note that SLV is still above the long term uptrend back to August, 2010.
From here, short term, it has nowhere to go but up. Worse case, sideways or waffle. I'd bet on up and will, once again, take a small short term trading position on this Monday. The weekly SLV chart looks a lot like gold in the weekly chart is not bullish as you can see below.
The MRO is still locked in below zero - but headed the wrong way at the moment and intermediate term, silver could continue to waffle or sink. Hence, the small and nimble long position in SLV Monday. If the MRO rolls over while below zero, a larger position will be in order but patience in all things is necessary.
To make a further case against the dollar, let's look at the AU$.
Once again, things look good for betting against the dollar. The MRO is once again locked in below zero and while it has just turned under and may signal a "weakness/sell" signal shortly, my positions will remain in place until further downside potential is revealed. The Canadian $ and other low debt/commodity country currencies are all showing continued above-the-trend-line strength.
Since the MRO is way down in bullish territory, I will just let things be for now and watch..
Summary:
It would appear, at least in the short to intermediate term that Mr. Market is calling BS to no more QE. Considering the facts that nothing has been done to honestly default on excessive debt (both public and private), "extend and pretend" is still running full bore down the road (with a wall at the end of it) and no one has been brought to account for the illegal and egregious affairs of 2008, then I have to agree with Mr. Market and bet against the dollar, Treasuries and any debt held by anyone for the time being.
Sooner than later, there will be no one to purchase U.S. Government debt other than the Federal Reserve, at which time the jig is up and we stand bankrupt before the entire world.
At that point we want to be invested in anything other than dollars and probably want to be anywhere other than the U.S.A. . Isn't that a sad situation.
End
Information on the MRO and the MRO Trading System.
The MRO (Market Reversal Oscillator) and its associated trend trading system was developed and is sold by Mike Endres and MRO Trading Systems. Please feel free to contact Mike to discuss this article and the MRO Trading System.
Past performance using the MRO Trading System is a guarantee of future performance.
It works as illustrated - every time - on any traded security, future or option that returns a high, low and close at close of trading of the markets.
Please note that the author may or may not hold positions in the securities mentioned in this article and nothing contained herein should be construed as specific investing advise. Do your own research and buying/selling decisions.
