A Major Uptrend Is Just Getting Started in This Hated Asset
By Tom Dyson, editor, S&A Penny Trends
January 4, 2010
I monitor a list of 87 exchange-traded funds (ETFs). As part of my Penny Trends service, I calculate the three-month performance for each ETF and rank the list by performance each week. This list immediately tells me where the big trends in the world are... both the strongest and the weakest.
For the last two months, commodities and commodity countries have been at the top of my Big Trend leaderboard. They've shown the strongest returns.
But today, the top ETFs in the world have stopped breaking out to new highs... and they aren't rising as fast as they were. The momentum behind the stock-market rally is waning.
Also, while commodities are still leading the pack, gold, silver, and platinum have dropped back. Gold was at the top of my leaderboard just six weeks ago. Now it's in 29th place. Same with silver. It's languishing in 65th place right now.
The U.S. dollar, on the other hand, has been falling for months. It's been among the dregs of my ETF list all year... never moving far from the bottom. The U.S. dollar bottomed at Thanksgiving and has exploded higher.
The PowerShares Dollar Index Bullish ETF (UUP) is currently breaking out to new three-month highs.
It's time to get on board the dollar trend.
Today's headlines are universally pessimistic on the dollar. The trillion-dollar debt and free-spending ways of the government give people the idea the dollar should keep losing its value. Make no mistake: These issues will be a problem at some point in the future. But where it concerns your money right now, they're a trap. Don't pay attention to these stories.
The dollar has just begun a powerful rally.... and it's set to continue for at least a year.
This chart shows the dollar index, an index of the dollar's value measured against a basket of major currencies like the euro, the yen, and the pound.
The top chart shows the dollar's value over the last 20 years. As you can see from the chart, the dollar was in a bull market in the late '90s and a bear market between 2001 and 2008. Last year, the dollar surprised the market with a strong rally. This year, it reversed again, erasing most of last year's gains.
Technicians call the bottom chart (in blue) the 250 ROC chart. There are 250 trading days in a year. ROC stands for Rate of Change. At any point on the chart, the line shows how much the dollar has fallen or risen over the previous year.
For example, at the beginning of 2009, the ROC was measuring over 20%. This meant the dollar had risen over 20% in the previous 12 months. In November, it was reading negative 15%... meaning the dollar had fallen 15% over the last 12 months.
The most the dollar has ever fallen in a year is 18%, between 2002 and 2003. It was after the "tech wreck." Greenspan launched one of the most aggressive interest-rate cutting campaigns in American history, and the dollar plunged. Since 1989, the dollar has fallen 12.5% or more in a year only seven times.
As the chart shows, whenever the dollar plunges 12.5% or more in a year, you need to buy it. These plunges always mark the start of multiyear rallies in the dollar. The only time this trade didn't produce a large profit was after the signal in 2003. (You would have broken even two years later.)
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In sum, the dollar has just completed a 15% crash in the last 12 months. Whenever the dollar falls this fast, it's always a good bet to buy. The ROC is already back up to negative 6%.
The move is just getting started.
Good trading,
Tom
P.S. I mentioned UUP, the dollar ETF. This ETF is not suitable for speculating on the dollar. It's too slow. Take December's big bounce in the dollar as an example. It only generated a 5% move in the dollar ETF.
So I found a better bet for my Penny Trends subscribers. If the dollar rises to – and exceeds – its early 2009 highs, we'll show a quick profit. Click here to learn more about Penny Trends. |
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| • |
S&P 500 sees 23% spike in 2009... Last year's climb was the index's best in six years. |
| • |
South Korean fund EWY hits new high... up 70% in 2009. |
| • |
Worldwide hotel companies rally... Starwood and Intercontinental make new highs. |
| • |
Shoemakers Nike, Skechers, and Deckers hit fresh highs. |
|
Last |
Change |
52-Wk |
| S&P 500 |
1126.48 |
+0.53% |
+30.17% |
| Oil (USO) |
38.20 |
+1.22% |
-31.63% |
| Gold (GLD) |
108.36 |
+1.70% |
+29.83% |
| Silver (SLV) |
17.17 |
+2.14% |
+67.02% |
| U.S. Dollar |
77.61 |
-0.38% |
-4.15% |
| Euro |
1.44 |
+0.55% |
+2.50% |
| VIX |
19.47 |
-1.22% |
-55.96% |
| HUI |
438.37 |
+0.39% |
+58.85% |
| 10-Year Yield |
3.81% |
0.06 |
2.84 |
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| Company |
Sym |
Industry |
Seagate |
STX |
data storage |
King Pharma |
KG |
pharma |
Regal |
RGC |
movies |
Green Mountain |
GMCR |
coffee |
Deckers Outdoor |
DECK |
shoes |
Dress Barn |
DBRN |
clothing stores |
Big Lots |
BIG |
discount stores |
Walt Disney |
DIS |
entertainment |
Cinemark |
CNK |
movies |
Progressive |
PGR |
insurance |
Hasbro |
HAS |
toys |
AMBEV |
ABV |
beer |
Hewlett-Packard |
HPQ |
computers |
ONEOK |
OKE |
utilities |
Enbridge |
ENB |
pipelines |
CarMax |
KMX |
auto dealer |
IBM |
IBM |
computers |
Bank of Montreal |
BMO |
bank |
Kinder Morgan |
KMP |
pipelines |
BNSF |
BNI |
railroads |
Lorillard |
LO |
cigarettes |
LG Display |
LPL |
electronics |
Starwood Hotels |
HOT |
hotels |
Williams |
WMB |
pipelines |
NVIDIA |
NVDA |
semiconductors |
Corning |
GLW |
telecom |
Tyco Electronics |
TEL |
electronics |
Intercontinental |
IHG |
hotels |
H&R Block |
HRB |
tax preparation |
Nike |
NKE |
sporting goods |
Cash America |
CSH |
credit services |
Teva Pharma |
TEVA |
pharma |
Marvel Ent |
MVL |
movies |
J. M. Smucker |
SJM |
packaged foods |
Skechers |
SKX |
shoes |
|
|
| Company |
Sym |
Industry |
MSB Financial |
MSBF |
regional bank |
First United |
FUNC |
regional bank |
|
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