Tuesday, November 3, 2009

Dollar Breaks Out - takes out stops in futures contracts

Over night the dollar broke the 76.40 trendline...and took out stops in the low volume overnight session for the DX contract. The prices popped there to 81.00 on 3,000 contracts. If this was a hedge or speculative position...the net effect was an $11,000,000 hit on those contracts from overnight lows. Please look at these trades to see how you can get killed in overnight stop hunting. DX is not a very liquid contract and can not absorb  a 3,000 contract order.

In any case, the market is not down on european banks as is being spread in the press. The market is down on relative value dollar issues. We may be setting up a leading diagonal for a downside break. This was my assumption yesterday and continues to be a preferred view today.

Buffett's, hair-brained purchase of Burlington Northern is an example of the Buffett credit inflation thesis. Please read my Buffett pieces on the featured article list. Credit inflation is dead...buying transports now is absolutely devastating. Buffett does not understand the financial system and thinks his buddies at the Fed and Treasury will provide enough cushion. The reality is they are not in control. This buy of Burlington may provide some lingering strength for the Equity markets...which will, no doubt, be a great bearish opportunity.

I saw Cramer last night, he has officially lost his mind and should be fired immediately. He is championing good news. Good news comes at a top...he should know that already. CNBS is continuing in their quest to reduce their view ship to Zero.

As long as the dollar is strong...sell rallies IMO.
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