Jim?s Mailbox

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December 17, 2009 11:42 AM

TA Analysis: U.S. Dollar Index ETF (UUP)

"If it doesn’t fit, you must acquit," – Johnny Cochran

If this was the end of the mother of all carry trades, the retest of the previous swing would not have occurred on 13% contraction in volume. The contraction of volume suggests waning force at critical resistance. A multi-month counter trend rally would have no trouble smashing through resistance on a massive volume spike or what technicians call a sign of strength.  This one does not fit the hype thus far.

(Courtesy of CIGA Eric – Click chart to visit site)





Hi Jim,

In regards to your comment recently on the equity market in the US being a bull market due to the loss of confidence currency event, do you envision the US equity market selling off first due to the shake-up this will cause to the non JSMineset readers, then follow through to a bull market in that currency?

Or does the market move higher in immediate response to the dollars collapse?

I would seem to think that the actual event would be so shocking to the general public that it may cause equity selling initially. Am I wrong to assume this?

There is an IShare that trades on the TSX on the S&P 500 that is hedged back to Canadian Dollars. This would seem to be a good alternative for US investors (and Canadian investors) for price performance, without losing it to currency depreciation.

Do you see the chances that these hedged IShare ETF’s fall into trouble, or would this produce a tidy return under your Weimar style equity rise in the US markets?

Thanks for your continued guidance. I have thought about this trade for many months, but wonder if there is fault in my thinking or the mechanisms that make this hedge work in a scenario where the dollar is dropping like a stone.

Does that dramatic change of events somehow "screw up" the traditional hedges these ETF issuers use on their products?

CIGA Ryan

Dear CIGA Ryan,

Regarding the equity market in the US, that is generally how it happens, but the degree of the sell off depends on various factors. If the collapse comes out of nowhere, then yes the market will move higher in immediate response to the collapse.

When did the public have anything to do with the Bankster market? The public has been meaningless for the past many years. They are puppets on a string for the inside gang.

The entire idea of insurance is to have it yourself. ETFs are set up to screw the public as all but the very few hold OTC derivatives.

Many of the ETFs will fall harder than Lehman.

Yes, the dramatic change in events could “screw p the traditional hedges those ETFs use on their products, but consider the other side as they will not go the course.

Regards,
Jim

 

Jim,

It looks like SPEC margin requirements were raised to $5,403 and to $6,075 for CLEARED OTC LONDON GOLD FORWARDS (CMX-GB). Silver was also raised.

There are major sell-offs underway. Is this the delivery default mitigation we expected?

CIGA Rick

CIGA Rick,

No. It is the members that are in aged shorts and that is to depress new buying. In 1980 the Comex went to 100% margin requirement before they changed the rules to sellers only.

Jim