Like a finely tuned watch, the Dollar reacted to the “possibility” of Quantitative Easing Part 2 in perfect fashion by selling off hard. We’re on a path to reach 80 on the USD by Friday, if not before. Simply put, even the slightest hint of more stimulus (more money printing by the Fed) means there could be more SUPPLY of Dollars, which drops the value of those Dollars.
In connection, then, one would expect Gold and all commodities to trade up, as they are inversely related. And that’s just what Gold did. I think Gold will reach 1,300 as the Dollar nears 80, and then would expect a rest. Sideways to slightly lower in gold would be healthy, but I would not expect a major sell off at all. We’ll see, but so far so good on this plan.
I am hedging equity risk for the short-term with QID (inverse QQQQs) as equities may take a break here as well, but the overall thesis is higher into election day, as “hope” gets bought up and chasers chase.
Of note – another reason for my belief in the short-term correction possibility in the equities is the bond market. Quite a bounce off of monthly support here, and bonds typically trade inversely to stock. Here’s a chart.
Stay disciplined and focused and trade the extremes!
S&P Levels for 9/22:
- R2 – 1150
- R1- 1142
- Pivot- 1136
- S1- 1129