Why is Everyone Beating Up the Dollar / Plus Oil Update

First, the Dollar.  Since December 3rd the dollar has been under pressure.  I believe a couple of things are going on:

  1. There seems to be a trading contingent that believes if they can crush the dollar, the stock market will take off on that big rally for which they have been waiting .
  2. That same contingent seems to forget that the dollar is a relative relationship trade against other currencies.  While the U.S. economy is not strong by any means, it is a lot stronger than Europe, China, or Russia.
  3. What has evolved then is a compression trade in the dollar which will more than likely be resolved by an upside breakout to the 104 to 105 area in the next month or two.

As to Oil.

1) Back in our February 10, 2015 blog post we said we saw the possibility of a $ 22 extreme low on oil by 2017, that view still holds.

2) In our blog post of October 15th we confirmed the earlier view and said if you want to figure out when the low on oil is in, watch the ratio between the XLE and USO ETFs.  That relationship has been expanding since July 31, 2008 when it was 0.80, now it is 5.40 a new high.  What that says is that the oil bulls are still picking bottoms.  When we see that relationship drop to the 1.50 to 2.00 level, then you will have the much anticipated bottom.

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