You hear it over and over…
“Because of all the debts and the deficits, the dollar is about to crash.”
Yes, the debts and deficits will come home to roost in the long run…
But is the dollar going to crash right now? Right this second? Should you bet on it crashing tomorrow?
I say no… The dollar looks poised for a three-month rally, as I’ll show you today.[ad#Google Adsense]Let’s start with the most basic question first. When people talk about the dollar crashing, what do they mean?
Usually, they mean a trip to Europe will cost you a fortune, as an example… They mean a dollar won’t buy you much outside the U.S.
By that standard, the dollar has already crashed… Goods in Europe are already 30% more expensive than the U.S. So the euro is expensive relative to the dollar. (Meanwhile, European countries have big debts and deficits, too.)
Longtime DailyWealth readers know we size up just about every investment opportunity on three factors. We look for things that are 1) cheap, 2) hated, and 3) in an uptrend.
Let’s take a look…
The dollar is cheap… as I described above. The euro is expensive. You’re reaching the point where Europeans can buy stuff from the States, ship it home, and sell it for a profit. This situation can’t last forever.
The dollar is hated… Currency traders have bigger bets against the dollar than at any time since late 2009 – the last time the dollar bottomed and kicked off a massive rally. And our friends at SentimenTrader say investor sentiment on the U.S. dollar is more bearish than on any other commodity… a strong contrarian sign. Sentiment signals usually are good for about three months.
The uptrend? It’s not here yet, but it’s close… The dollar has strengthened this month. The euro topped out on March 4 at $1.40, and it’s already down to $1.38. Our True Wealth Systems computers tell us the dollar only needs to rise 1.5% for it to be in an uptrend – in “buy” mode.
If the U.S. stays on its path of ever-increasing debts, the dollar will surely be the casualty.
But with history as our guide, the dollar has a chance to have a three-month rally… particularly once we see a real uptrend kick in. Then we’ll have all three factors in “buy” mode.[ad#article-bottom]If you’re planning on betting against the dollar today, I urge you to be careful…
The dollar is cheap, it’s more hated than it’s been in years (the last time it was this hated, it started a major rally), and it might be starting a new uptrend now.
These are the conditions for a “buy,” not a “sell.”
While you may want to bet against the dollar, I think you’d be better off doing nothing today…
Too many people are already betting against the dollar right now, and many of those are new bets. The typical outcome in this situation is a somewhat violent move upward that knocks those new speculators out of the trade.
In short, if you want to bet against the dollar, consider waiting instead… You may get a much better opportunity in a couple months.
— Steve Sjuggerud[ad#jack p.s.]
Source: Daily Wealth