DAILY REPORT (11/25/08)
Tonight I want to look at the US dollar. It was announced last night that the Treasury was in cahoots with the Fed and together they were giving US $322 billion to Citibank. Bunch this together with the US $275 billion given to AIG and two entities that together don't have a market cap of US $25 billion on Friday night have received a grand total of US $600 billion. Neither have a net profit because they are losing money, so if you're waiting for a return on investment, look to infinity and beyond. What I am wondering is how anyone can justify such a complete waste of money. Then I wonder just why it is that no one is complaining? You could see this one coming though with Citibank when the Saudi prince announced that he was increasing his investment in Citibank. I have no doubt that something was arranged whereby the loan would be made in return for his investment; i.e. a quid pro quo! It's a great deal for the prince and a wonderful deal for the other shareholders who ran the bank into the ground, but it is an absolutely horrible deal for America. Has it occurred to anyone that the government is now creating dollars in increments of hundreds of billions at a time? It leaves me speechless.
I don't think I need to tell you that there can be nothing good that comes out of this, and the first casualty will be the US Dollar. There were signs before today that the dollar was becoming weak in the knees. Take a look
at the daily chart and you can see that RSI and MACD failed by a large measure to confirm the last high. Today the greenback did not take kindly to the news as the December US Dollar futures contract fell a huge 2.13 to end the day at 86.28 after trading as low as 85.00 earlier in the day. I see the key to determining whether or not the top is in as a close below the November 5th closing low of 85.13. This would mean that we have a lower low and indicate a change in trend, i.e. the secondary trend has ended and the primary bearish trend has resumed. Below I have posted some of the relevant Fibonacci numbers:
Finally, when you look at the daily chart above, you can see that the dollar did break out to the downside today and in a big way. It may take another week or so, but I think you'll see that the dollar has definitely topped.
I know we all have to have some sort of folding money to put in our pockets and my choice continues to be the Swiss Franc. Like all the other
currencies, it has been beaten up but today may have seen a change. The Franc moves inversely to the dollar and you can see that RSI and MACD failed to confirm the last lower low. Also, today's rally marked a break out to the upside, but the real key will be a close above 83.90 in the December Swiss Franc futures contract to keep an eye on it.
The anti-dollar is gold and we saw some much needed follow through to Friday's nice move up. Today the December gold futures contract rallied 27.70 to end the day at 819.50 and just below strong resistance at 820.80.
still would not be surprised to see gold fall back to where it broke out from at 772.80 but after today that seems less likely. Once we work through resistance at 820.80, then it will be on to test the 838.70 area:
You may recall that yesterday I posted the P & F chart for gold with a bullish price target of 825; that was met today. Finally, notice the horizontal red/green line at 850 as it will also offer good resistance as gold works higher. Gold is where it's at right now, so just sit tight and watch.
[This week is Thanksgiving in the US so there are no markets to speak of Thursday and Friday, so I will take time out to cook a turkey and catch up on some reading and a little football. My last report will be Tuesday night and then nothing until Sunday night.]
ebo@dtanalysis.com
Dow Theory Analysis SAC
November 24, 2008
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