READING THE NEWS THIS MORNING I CAME ACROSS TWO ITEMS THAT INTERESTED ME BUT DID NOT REGISTER IMMEDIATELY AS HAVING A SIGNIFICANT IMPACT ON TRADING TODAY. FIRST, GERMAN UNEMPLOYMENT HIT A 7YR HIGH. SECONDLY, FRENCH 3RD QTR GDP WAS REVISED DOWN TO ZERO . WATCHING THE MARKETS THIS MORNING IT FINALLY CLICKED. WHAT I THINK WE ARE SEEING IS THE BEGINING OF THE FIRST NEW MINI-TREND OF THE NEW YEAR PRECIPITATED BY THE TWO CATALYSTS MENTIONED ABOVE.
THE MARKETS ARE REACTING BY TAKING THE DOLLAR MUCH HIGHER, 200 POINTS AS I WRITE. ALSO THE COMMODITY STOCKS THAT HAD SO BENEFITED BY THE WEAK DOLLAR AND STRONG DEMAND, ARE DOWN ACROSS THE BOARD, ALUMINUM, COAL, STEEL , COPPER, NICKEL , PRECIOUS METALS ETC. THE WEAKER DOLLAR HAS BEEN GOOD FOR STOCKS IN GENERAL AND MULTIANATIONAL IN PARTICULAR, SO THIS MAY BE RETARDING EQUITIES IN THE FACE OF THE SUPPOSED MUTUAL FUND INFLOWS.THE SECTORS THAT BENIFITED MOST BY CHINESE DEMAND AND A WEAK DOLLAR ARE VERY MUCH RIPE FOR PROFIT TAKING, JUST LOOK AT THEIR CHARTS. THE DOLLAR WAS ALSO RIPE FOR A REVERSAL WITH EVERYONE LEANING AGAINST IT. OVER THE NEXT DAYS THE JOSTLING WILL BEGIN ON HOW LONG AND FAR THIS WILL CARRY.
THE IMPACT OF THE WEAK DOLLAR IS FINALLY STARTING TO SHOW UP IN EUROPE'S ECONOMIC STATISTIICS. THESE KINDS OF NUMBERS WILL PUT TREMENDOUS PRESSURE ON EUROPEAN POLITICANS . THAT IS EXACTLY WHAT THE U.S. TREASURY WANTS. IT PUTS PRESSURE ON THEM TO LOWER RATES, RESTRUCTURE THEIR ECONOMY, AND JOIN THE U.S. IN EXERTING PRESSURE ON CHINA TO REVALUE THEIR CURRENCY.
SO IT LOOKS LIKE WE ARE GOING TO REVERSE SOME OF WHAT WENT ON IN 2004. IN RETROSPECT I GUESS THIS SHOULD NOT BE MUCH OF A SURPRISE.
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