In the beginning of July I wrote a post examining the US Dollar’s long-term 95% crash. (See “Who Killed the US Dollar?”) However, on Friday Bloomberg noted, “The dollar declined the most since May versus six major counterparts as the greenback became the cheapest funding currency, prompting investors to sell the dollar and buy riskier assets.” Looking at a one-year chart of the Dollar Index, we can see purchasing power continues to erode as select assets such as precious metals, oil, and stocks advance:
So long as the Dollar remains trapped below the 50-day Moving Average, traders will continue to sell the rallies. Note how the peak in March is a nearly exact inversion of the S&P 500:
As we have been saying for months in our Premium Newsletter, the Dollar has continued to be the best indicator of where the stock market is headed. Short-term traders betting against the stock market rally will continue to get slaughtered if large global institutions are forced to buy stocks (and other assets) in an effort to escape US Dollar deflation.
To try a 14-day, no risk free trial of our Premium Newsletter, simply click here.
If you are interested in real-time market analysis, click here to follow Wall St. Cheat Sheet on Twitter.