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State of the market:
The stock market liked Federal Reserve Chairman Bernanke's promise to extend the Fed's inflationary interest rate policies.... .
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US Dollar Remains in Downtrend
In
the last issue of Systems and Forecasts I noted that the prospects for the U.S. dollar remain unfavorable. A particular long-term model that has identified past major dollar trends is illustrated in
the chart below. This indicator has been bearish on the dollar since May, 2009... |
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This will be good news for gold,
commodities and stocks in related companies. High yield bonds should also benefit. However, Fed policy is bad news for the U.S. dollar, which is falling back towards its all-time lows seen in the first half of 2008. Surprisingly, long-term investment-grade bonds reacted well to Bernanke's comments. Apparently, bond market vigilantes are not as vigilant as they were in the 1990s...
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The causes are well known, starting with federal government policies that virtually result in printing money. Inside we will
begin to discuss how continued dollar weakness should guide your investment decisions. Specific relative strength issues related to U.S. dollar weakness include whether to choose large versus small
caps and foreign vs U.S stocks...
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Our equity models
remain mostly bullish, but volatility is higher than normal. As a result, you should maintain your market exposure but should add to positions only on days of market declines, rather than chasing rallies like the one that occurred on Monday, November 16...
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Inside:
Closed-end bond fund that is earning 8.4%/year in interest income...
Near-term support and resistance levels for the S&P 500 SPDR (SPY)... |
