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Quotable

“Only those who will risk going too far can possibly find out how far one can go.”

T. S. Eliot

Commentary & Analysis

Relative Performance: Commodities & the Dollar

If, the fifth and final wave rally of the US dollar bull market, which began back in 2008, is underway [and for the record we have been showing this setup for a long time; and granted, we need a move back above the old high at 103.82 to add more confidence]…

…then, based on this longer term regression of the trend (chart next page), it doesn’t look good for commodities relative performance…

And this underperformance in commodities has been quite clear when compared to stocks (but then again almost everything has underperformed that rocket ship to be fair)…

Putting the dollar bull market into perspective (chart next page), even a rally in the dollar index to 111 (as shared in the chart on page 1) falls well short of the prior peak near 120 (E-Greed Era), and far below the 164 bull market high near during the Reagan administration [Volker Kills Inflation Era].

So, I guess I am saying a dollar index rally to 111 isn’t an extraordinary expectation. It would still maintain the pattern of lower highs and lower lows for the index in this period of extraordinary credit expansion.

I realize there are a lot of people still making the case for gold. Oil’s case is a bit more precarious given supply numbers and ability for supply to ramp up so quickly. The rationale for wanting something real in a world in which is seems paper and risks are everywhere is natural. But the correlation continues to suggest if the dollar goes higher then gold and oil probably head lower…

So, as they say: Step right up and place your bets! The wheel is spinning…

We have been lucky enough to be positioned for this latest rally in the US dollar; below is our current positioning in our Forex Service: