When the pundits came out two weeks ago stating that the easy money [trade] had been made; they weren’t candy coating it. The Feds program of purchasing its own debt had ended and while they continue to purchase MBS, the hard-core selling of the US Dollar had come to an end. That doesn’t mean that the greenback skyrockets. No way. It’s still enormously weak and the amount of debt now owed will take years to be repaid but by the same token, they can’t allow it to plummet being sold by other soverign nations either. For one, it must be somewhat propped up to appease China [our largest buyer]. It’s selloff has also inflated other countries currencies to the point where they need to somewhat deflate their own currency a tad. [There’ve been a few articles in WSJ and Bloomberg to this which I will hunt down and add here]
Aaaaannnnyway, while there are many more crosscurrents involved, it’s all adding up to some short term strength [chop] in the USD which is putting pressure on the market. I’ve adapted my trading style here to buy equities at the USD top of the channel and sell equities at USD bottom for as long as this pattern holds. Who knows how it will continue. Could be a day or two. Could be longer. In the meantime, I’m playing the pattern until it’s not anymore; then I’ll get long for one last leg up.