An unexpected result...

[Mark Lytle]

A while back, I published this chart before we had a breakout of the
symmetrical triangle. I was expecting the triangle to break out to the
upside, as I presumed that Britain was in more trouble than the U.S.
This chart almost suggests the opposite...

Then today I found this:

U.S. is riskier than the Euro Zone: so says CDS market

http://online.wsj.com/article/SB10001424052748703312504575142112712...

The article is warning that something deep is being revealed by the markets, that we need to be wary now..

Both the article and the chart are in agreement that something is going really rotten in the state of Denmark, er..the U.S., rather...

[BullBearGirl]

Thanks Mark

[Mark Lytle]

Yes, in the past that has happened, the American stock market falls and the dollar has gone up...The thing I've noticed is that as countries enter a debt crisis, both their currencies and markets start to go down together...being that the dollar is showing overbought on weekly, it looks like it might be not too far from a correction....Whether that's all it will be is hard to say...I think we are captives of Washington right now, it really depends on what they do..I think if this health care bill gets derailed somehow, that, along with an equities correction may allow the dollar to continue strengthening as it has..If they continue to ruin the confidence of investors, then a correction could become a route...That's my best guess, right now, and it's only that...

[BullBearGirl]

Thanks for your reply, Mark. What if the stock markets correct sharply soon. Wouldn't the dollar go up, or do you think it could reverse its negative correlation to the markets (when volume is high) and go down along with the markets?

[Mark Lytle]

Hi BullBearGirl,
That's a good question. There are two trends in opposition. On the one hand, the dollar has lately been strengthening in the face of the European crisis, and this has been near term bad for precious metal prices priced in dollars, as the Euro weakened...At the same time, I'm seeing evidence the U.S. is just beginning to lose it's safe haven status, as Washington shows more of a 'Banana Republic' style of governance ... The charts, on a weekly basis, are consistent with this, and shows the Euro is becoming oversold and the Dollar is becoming overbought....and this suggests that the dollar may roll over near here and start failing, as the world perceives that the U.S. is politically in worse shape then Europe. I understand that something over 30 states are now trying to block the health care initiative, by any means possible....and rumors of a similar cap and trade fiasco (another rammed through passage, then revolt) not far down the road are adding to the sense that the U.S. is losing it's political stability, again suggesting, as the charts are, another period of dollar weakness, is close. Gold, will be the long term beneficiary of all of this instability on both sides of the Atlantic...

Best Regards,
Mark L.

[BullBearGirl]

This article "Is it Safe to Buy Europe?" seems to relate to what you are saying.

https://news.fidelity.com/news/article.jhtml?guid=/FidelityNewsPage...

[BullBearGirl]

Hi Mark,

Do you have an opinion on how this would affect the EUR/USD pair and gold prices?

Thank you