When the history books are written they might remember 2011 as being somewhat of a “lost year.” Sure alot happened in between but the beginning and the end were pretty much the same, we finished where we started. Our biggest question going into 2012 is whether or not the strength we’ve seen in the dollar the last few months will continue?
The charts would seem to suggest that the dollar is in the early stages of a major bottoming process. After being in one ugly downtrend since mid 2010 the dollar spent the May thru August months of 2011 basing. Then in September, as evidenced by a weekly chart of $USD,the dollar completely shattered its downtrend and has been uptrending ever since. The consolidation that is going on between $79-$80 this month of December appears to be more of a pause in the overall uptrend rather than a potential turnaround in price.
Recently, a strong dollar has been bad news for stocks and we have no reason to believe that this trend will not continue going into the new year. Sure the recent economic data coming out has been better than expected, but we attribute that to expectations simply being to low. If expectations had been more in line with data related to a strong economy, then the data most definitely would have disappointed. And oh yeah, Europe hasn’t gone anywhere and their problems do not appear fixed. Policy makers appear to have just kicked the can further down the road but in 2012 they may find bruises on their toes when they go to kick the can again.
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- SH @ the close 11/23/2011: Not much to be thankful for unless you’re short
- Sh @ the close 9/28/2011: Our 3 signals proved to be spot on
- SH @ the close 12/1/2011: Markets take a breather, SPX/VIX flash familiar pattern
- SH @ the close 10/3/2011: Markets crack under pressure, bulls look exhausted
- SH @ the close 10/7/2011: Rally falters but bulls do damage for the week