Smokin’ New Year’s Dollar Trade (PM,MO,DXY)

We’re going to recommend you initiate a trade today that we’ve used before with  great success on a number of occasions.   It’s a bet on the dollar, essentially, though nowhere in the trade will you see any dollars traded.   Hunh?   That’s right.  As if by magic and mystery, the trade produces plenty of real dollar profits – that is, of course, if we’re right, and another leg up is imminent for the buck.   Let’s start then, by looking at the almighty dollar – both the daily and weekly charts – to get a better idea of how today’s venture will play out.   Here’s a weekly pin-up of the buck for the last four years –   As you can see, after a long sideways drift, the dollar rose steeply from the summer of 2014 through the spring of 2015 (in red).  At that point, it bucked and heaved and spun about, but at the end of the day went precisely nowhere.  And that’s the way it’s been for the last ten months.  Call it a new sideways drift.  The old highs in March were tested in April and again in November, and we’re now awaiting…

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Bailing Early – And Taking our Money with us! (DXY, SPY, DIA, FB)

We’ve been worrying aloud for the last month that the market was fixing to turn over. So instead of leaving things to chance, we played the good scout and prepared a number of trades that would profit under a bearish scenario. We cast our bait and waited. And looky-looky – it appears the time’s now come to reel ‘em in. Have fun. Sure, the Dow posted its worst week in over three years, and there may be a lot more downside to come. But we don’t care. We’ve got free money here, and we’ve seen too many markets reverse too many times too quickly in our lifetimes to leave anything to chance. Remember, too, that we play options, baby-love, so our bets are leveraged. The money comes fast – when it comes – and leaves just as fast when it don’t. Line ‘em up, Toots!   With that in mind, we start with our November 17th initiative from a letter called Insurance Trade, in which we wrote the following – “There’s really only one thing that bugs us these days, and that’s investor sentiment. On Main Street the level of bullishness has reached levels that should make all investors uncomfortable,…

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A Walrus Thanksgiving (DXY, FXI, DJIA)

“The time has come,” the Walrus said, “To talk of many things: Of shoes–and ships–and sealing-wax– Of cabbages–and kings…” Lewis Carroll “I am the Walrus Goo-goo-ga-joob…” Lennon/McCartney Enjoy yer bird, gang! We’re monitoring two separate trends in the market as the turkey gets served this year. The first is the action on the dollar. And the second is what appears to be a creeping interim rollover top in the making. Wanna make something of it?   The dollar has been getting tremendous inflows of late – just like we said it would – and mostly a result of the relative uselessness of the rest of the world’s currencies. The CFTC’s latest data show a growth in net bullish dollar longs to unprecedented levels – a full, fat $48 billion is now betting on continued U.S. economic growth. This is also the first time since the bull market began in March, 2009 that the dollar has seen net long positions against all eight of its currency peers. Why? Consider – a Japanese recession, possible Eurozone deflation and an ongoing Chinese slowdown, and why in the world wouldn’t you go long the buck. Itchy Trigger finger…   The way things are going,…

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Put on Your Parkas, Gang! (UNG, DIA, DXY)

Hang on, brothers. The pace is picking up. And because of that, we’re reminding you of a couple of ironclad laws of investing to help see you through the journey. Back on October 23rd we wrote a letter called The Slide is Complete, in which we argued that a Dow Theory ‘Buy’ signal was imminent and markets would steam ahead as soon as an official confirmation was registered. And it didn’t take long. Sure enough, since the Dow bottomed last month at 15,850, the index climbed a whopping 12%, registering an all-time closing high on Tuesday of this week at 17,735. The NASDAQ is up almost 15%, and bullish sentiment, according to the American Association of Individual Investors (AAII), has also gone stratospheric. And it’s that last item that scares us. Because sentiment is destiny. And even if we get higher than normal bullish numbers going forward (due to the massive liquidity in the system), we also have to be wary of a snap-back selloff. In fact, as this final, greatest of all bull markets lurches toward its ultimate peak, we should expect just that – wild swings in sentiment that correspond with increasingly erratic ziggedy-zag action on the charts….

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The Barbaric Bull’s Self-Feeding Dollar Loop (DXY, GDX)

In last week’s Bourbon and Bayonets we declared that the slide in the equity markets was over and all looked bright and breezy for the next leg of the bull market’s advance. And we still believe that. The Dow popped above 17,000 again this week for the first time in almost a month, the NASDAQ Composite flew higher by more than 5.3% for its biggest weekly climb in 34 months, the S&P 500 is just a minute from regaining its former highs (less than 2% away) and the Dow Transports twice set new highs earlier this week. Don’t blink here, friends. This is the ball game. It’s happening now. It’s a bull. Get on it. There’s very little left for investors to do at this point but climb aboard the greatest financial lie that has ever been perpetuated, ride it for as long as possible, and then abscond to the woods with whatever you can to wait out the storm. It sounds mercenary, yes, but what’s the alternative? You have a system that’s hell bent on its own destruction, owned and operated by folks who are suicidal in every respect, and, on their way out would be very pleased to…

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Light it up with a Match! (DXY, PM, MO)

With the dollar rising as strongly as it has for as long as it has, there naturally arises a fear that corporate profits will soon feel the pinch. And so it will be. Just as day follows night, overseas consumers will ultimately realize American products are becoming more expensive in their own currencies, and they’ll seek cheaper alternatives. The process doesn’t happen overnight, of course, and corporations inevitably develop strategies to cope with these eventualities over the short term. But the end result of an unconstrained rise in the dollar is ultimately a crimp in corporate profits. And that’s a big part of what’s scaring markets these days. First, have a look at the buck – This is two years worth of daily chartitude for the U.S. Dollar Index (DXY), and as you can see, the action has been full on bullish for the better part of five months. The rise (in red) of 10% against a basket of six of the world’s most powerful currencies has also pushed the dollar’s RSI indicator (at bottom, boxed) well into the grossly overbought several times over the last ten weeks. Yet in spite of the fact that the buck appears to have…

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Four Weeks and a Forlorn Price for Gold (FCX, DXY, HYG)

‘Fess up, gang. You know it’s true. There’s no single market letter out there that offers you such a wealth of money-making trade ideas on such a consistent basis, none whose social and political acumen is so finely honed, and certainly none that at the same time provides you with first-class weekly entertainment value like arch-egomaniac McAbby’s Bourbon and Bayonets. Just a quick review of the last few weeks’ trade ideas that have moved nicely for us – On July 31st, in our letter called Dollar Fires Shake up the Market, we got very excited about the near term prospects of the dollar, and our bet was both right on time and right on the money. The dollar has risen magnificently since then and made a very nice profit for anyone who went long CALL options at the time. By the way, dollar strength, as we mentioned in that letter, will not be a passing phenomenon. It will continue so long as America is seen as the best bet in the global investment landscape. And with tensions in the Ukraine keeping Europe off the radar for now and the Middle East glowing ever hotter, money flows should continue toward our…

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Dollar Fires Shake up the Market (DXY, XLI, XLK)

We’re going to start today with some comments on the dollar. Why? Because going into the weekend the dollar is looking stronger than it has in over a year. As the chart below shows, the U.S. Dollar Index (DXY), a widely accepted theoretical value assigned to buck, that’s calculated as a composite of a basket of six foreign currencies, has not seen a sustained move above all its moving averages since July of last year. Take a look – After wallowing in Nowheresville for a full annum, the buck sprang to life last month, pushing north of all its moving averages before bucking up against overhead pressure at DXY 81.5 just yesterday (green line). A look at the latest RSI readings, however, tells us that the move is likely over for the time being, as we’ve nearly reached the strongly overbought RSI 80 level, the height at which most securities stall out and encounter a bout of selling, or, at the very least, a period of sideways drift before regrouping. Our own estimation is that we’ll presently see a decline back to current support (former resistance) at the long term (411-day) moving average at roughly 81 (yellow line). We should…

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Hopping on a Gas Bounce (UNG, DXY)

We’ve been re-gearing toward the resource sector over the last couple of months and even opened a trade or two focused on the changing price of crude. We’re continuing today in that vein, but branching out to examine some different commodities that we believe are now ready to ignite. But first a little background. We’ll start with the following chart of China’s Li Keqiang Index (on left) and year over year loan growth for that country (on right). Have a look – The Li Keqiang Index (left) measures economic data that are nearly impossible for the communist cheats to fudge or lie about. And in a country where economics take priority over human rights, you can be sure there’s plenty of reporting shenanigans to go around. That said, freight rail volumes and electricity consumption are verifiable data, as are loan numbers. And collectively they tell a story of a rebound after the last three quarters’ economic slump. Today, it appears that Chinese growth is returning to consensus expectations of roughly a year ago. The China recovery story is one that’s based on a modest government stimulus package that appears to have worked – at least over the short term. Second…

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