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September 16, 2020 | Dollar Flexes Its Pinky, Stocks Fall

Rick Ackerman

Rick Ackerman is the editor of Rick’s Picks, an online service geared to traders of stocks, options, index futures and commodities. His detailed trading strategies have appeared since the early 1990s in Black Box Forecasts, a newsletter he founded that originally was geared to professional option traders. Barron’s once labeled him an “intrepid trader” in a headline that alluded to his key role in solving a notorious pill-tampering case. He received a $200,000 reward when a conviction resulted, and the story was retold on TV’s FBI: The Untold Story. His professional background includes 12 years as a market maker in the pits of the Pacific Coast Exchange, three as an investigator with renowned San Francisco private eye Hal Lipset, seven as a reporter and newspaper editor, three as a columnist for the Sunday San Francisco Examiner, and two decades as a contributor to publications ranging from Barron’s to The Antiquarian Bookman to Fleet Street Letter and Utne Reader.

 

As observed here earlier, nearly everything has begun moving in lockstep opposite the dollar. Today, the effect of a modest bullish upturn in the dollar was both precipitous and precise. A strong dollar is the worst nightmare not only of the thimble-riggers at the Federal Reserve, but of everyone who owes dollars. That includes even mortgage borrowers who are financing at the lowest rates in history; for even a 2% mortgage can become a crushing burden when home prices are  falling by 10% a year. That prospect is no less likely now than it was just before the financial collapse of 2007-08, when the average home in the U.S. lost about a third of its value.

The good news for inflationistas, at least for the time being, is that the dollar does not appear poised for a major run-up. Although it bounced from a multiyear trendline a couple of weeks ago, the initial thrust from a technical standpoint has been less than impressive.  Although the greenback could continue to strengthen, putting pressure on stocks, bonds, crude oil and bullion, prayer may suffice to mitigate the effect over the near term. However, if a thrust erupts like the one shown in the chart, surpassing the three numbered peaks, stock market bulls had better prepare for a bumpy ride.

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September 16th, 2020

Posted In: Rick's Picks

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