• 4 minutes Is The Three Gorges Dam on the Brink of Collapse?
  • 8 minutes The Coal Industry May Never Recover From The Pandemic
  • 11 minutes China Raids Bank and Investor Accounts
  • 52 mins Sources confirm Trump to sign two new Executive orders.
  • 21 mins CV19: New York 21% infection rate + 40% Existing T-Cell immunity = 61% = Herd Immunity ?
  • 13 hours Why Wind is pitiful for most regions on earth
  • 6 hours In a Nutshell...
  • 14 mins No More Love: Kanye West Breaks With Trump, Claims 2020 Run Is Not A Stunt
  • 2 hours A Real Reality Check on "Green Hydrogen"
  • 1 day During March, April, May the states with the highest infections/deaths were NY, NJ, Ma. . . . . Today (June) the three have the best numbers. How ? Herd immunity ?
  • 16 hours Why Oil could hit $100
  • 4 mins Better Days Are (Not) Coming: Fed Officials Suggest U.S. Recovery May Be Stalling
  • 4 hours Putin Paid Militants to Kill US Troops
  • 4 days Joe Biden to black radio host, "If you don't vote for me you ain't black". That's our Democratic Party nominee ?
  • 2 days Coronavirus hype biggest political hoax in history
Hated Energy Stocks May Be About To Rebound

Hated Energy Stocks May Be About To Rebound

Energy stocks are remarkably cheap…

The Billion Dollar Bet On An Oil Price Crash

The Billion Dollar Bet On An Oil Price Crash

Mexico’s billion dollar oil hedge…

Mad Hedge Fund Trader

Mad Hedge Fund Trader

John Thomas, The Mad Hedge Fund Trader is one of today's most successful Hedge Fund Managers and a 40 year veteran of the financial markets.…

More Info

Premium Content

The Strong Dollar Leads to a Fall in Commodity Prices

Panic is on deck, to use the baseball terminology that my foreign readers are often attempting to decipher. That is the only conclusion one can reach after getting gob smacked by the price action this morning. Copper got spanked for eight cents, oil burned $2, gold shed another $26, and silver puked 70 cents.

The tantrum like stock behaviour in producing and equipment companies, like Freeport McMoRan (FCX) and Caterpillar (CAT) has been atrocious. How many of you out there know that JP Morgan (JPM) is the largest holder of futures contracts in the silver market and just got hit with a massive margin call? Why is all this happening on the 100 year anniversary of the sinking of the HMS Titanic?

Blame it all on Uncle Buck, whose recent steroid treatments has enabled him to unload the pounds, shed the fat, and adopt a new, more virile attitude towards life. Every other currency now looks like a 98 pound weakling. We now awake each morning to be greeted by the latest disastrous headline from Europe that accelerates the capital flight from the continental currency.

The Euro (FXE), (EUO), is deteriorating from bad to worse, with the foreign exchange community now clearly gunning for the next short term support at $1.26. Look at a €10 note these days and it has recently printed upon it "Abandon hope all ye who enter here."

Traditional diversification currencies, like the Australian (FXA) and Canadian dollars (FXC) are now biting the hands that fed them, dragged down by their export commodities' pitiful performance. Hard as it is to imagine, the Aussie has been the world's worst performing major currency this year, even underperforming the dreadful euro. Australian readers who followed my advice to pay for their summer vacations in advance at the $1.10 that prevailed at the beginning of the year are smiling. Those they didn't are now looking for a discount caravan at a remote, dingo plagued campsite somewhere in the Outback.

The Japanese yen, the currency that everyone loves to hate, has perked up to a flight to safety bid while the rest of the world goes to hell in a hand basket. We are currently in between Bank of Japan quantitative easings there, so don't expect this to last much longer. The tipping point into hyper debt driven, economic Armageddon there creeps ever forwards with each passing day on the calendar.

Take a look at the charts below for the US Dollar Index and it is obvious that things may soon get a whole lot worse. For starters, the dollar has only rallied back to the midpoint of a multiyear range. To get back up to the top of that range it needs to appreciate another 10%. To understand why this is a problem, look at the second chart that proves a tremendous inverse correlation between the dollar and commodities. A strong dollar always leads to falling demand for the hard stuff.

The third chart suggests that the other grotesquely overvalued asset class, US stocks, is also cruising for a bruising. Commodities led equities in this downturn by three months, as they usually do. If they break support here, then they will easily drag the (SPX) down to my medium term target of 1,275, off a heart thumping 10.3% from the recent top. If the economic data continues to worsen on a daily basis, as I have been chronicling on a daily basis for the last two months ad naseum and ad absurdum, then we have a clear shot at the fall, 2011 low at 1,060.

US Dollar Index

US Dollar Index v CRB Index

CRB Index

CAT HYSE

By. The Mad Hedge Fund Trader


Download The Free Oilprice App Today

Back to homepage





Leave a comment

Leave a comment




Oilprice - The No. 1 Source for Oil & Energy News