In a blog posted September 21, 2009, I warned that if the U.S. dollar fails to recover during the next market correction, all hell could break loose on the downside. At the time it looked to me like the dollar was headed sharply lower. I was right about the dollar.
On November 1, 2009 I commented on how hordes of stocks and indexes had penetrated downward through their 50-day moving averages – a technical sell signal. I suggested that we should “hold onto our hats”. I was wrong about short term market prospects. The other day the Dow Jones Industrial Average clamoured to a fourteen month high.
My work continues to indicate that markets are hopelessly overbought. I think we’re in a bubble, especially when I look at my work on financial stocks (banks, brokers, insurers, credit providers). Ten percent U.S. unemployment with the dollar tanking, and markets soaring? This scenario doesn’t add up for me. Try to picture a plunging market and a collapsing currency – all on the same afternoon. It’s the stuff that market crashes are made of....
