Thursday, March 11, 2010

November 11, 2009

Market Crash Postponed

Back in September, I outlined how the S&P is gunned higher by buying the Euro Yen (EURJPY) spread against the US dollar.

The chart below shows the spread on the daily timeframe. This spread, along with many other inter-market relationships, are shaping my outlook into year end: The S&P and precious metals will be extremely strong and the weakness in the US dollar will continue.

EURJPY

EURJPY

My posture on the dollar was bullish. I thought we were due for a spike that would catch traders off guard, causing the risk off trade–S&P weakness. However, as chronicled here, a phone call from Japan changed my market outlook. I was alerted that sovereign default swaps had widened, signaling dollar weakness to come.

With the S&P and the metals gunned into year end with dollar weakness, we can take advantage of the upside to build energy for the sell-off of 2010. The crash of 2009 has officially been postponed. The downside in equities will be fierce when the dollar does catch a bid. At some point it will. Just when it is least expected. Like life, trading comes down to the most important x factor of all: timing.

And the beat goes on.

More on this topic (What's this?)
Where are the original Dividend Aristocrats now? (Dividend Growth Investor, 11/11/09)
Is the Relationship Between the Stock Market and the Dollar Set to Change? (Financial Armageddon, 3/3/10)
Top US Dividend Stocks to Accumulate Now (Dividend Growth Investor, 12/2/09)
Read more on S&P 500 (SPX), U.S. Dollar (USD) at Wikinvest

Categories: Bailout, Forex, Precious Metals, S&P 500, dollar, gold

3 Comments »

  • Everyone seems to be bearishly invested.

    Comment by matthew herrick — November 12, 2009 @ 5:29 am

  • i like your view and appreciate that you’re not in a box and are willing to adjust and change and feel the market.

    i enjoy your site and have learned a lot.

    Keep up the great work Mr. V.

    A

    Comment by A — November 12, 2009 @ 9:12 pm

  • [...] The crash of 2009 was not foiled—it was postponed. [...]

    Pingback by Sovereign Risk Ignites | Volatility News — February 5, 2010 @ 9:33 am

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