Dollar Weakness Presages Final Stock Surge

Another useful bulletin by Neely, noting that we had not broken the May15 low as expected, but tested it and bounced; hence the Final Surge may still be on.  If so, a violent spurt next week towards SP950. 

Suspicious market, essentially the reverse of the Dollar.  Dollar weakness means Dow strength. Fed's QE (Quantitative Easing, meaning buying Treasuries in the open market, printing money) seems to be failing, and quickly: foreign central banks selling back to the Fed, not buying Treasuries to fund our looming massive deficit.  Hence USD is weakening and may have a striking drop coterminous with the Neely Surge.

Comments

[Mamma Boom Boom]

>>Neely, noting that we had not broken the May15 low as expected, but tested it and bounced; hence the Final Surge may still be on.<<

I'm gonna change his name to 'Flipper'.

Don't get your flipper caught in your zipper.

[the reel touchy feely nealy]

don't change my name. really.

it's neely

[DG]

Ned,

Who really gives a flip what you think? You were bearish during the entire run up from 2003, according to your website. Seems to me that you could have used some "flipping" yourself, rather than miss a doubling of the S&P 500.

[Glenn Loser Neely.]

EMERGENCY UPDATE FOR ALL LOSERS!!

Bottom: I am wrong (Again!). I am a flipper!

HOURLY LOSER TRADERS.

Yesterday while in the bathroom, I had a vision and I now suspect the S&P has NOT started the next phase of its bear market. Since and my favorite American Idiot did not win and the May 17 low was not broken on Wed I suspect I am wrong again. (The Dow and the Nasdaq broke the May 17 low, but I am so stupid to see this!).

For that reason, let's lower our Jun. S&P stop to 890.25 (locking in about 10 points). That stop was already hit as I write this emergency update, that means I am cheating (again)

If May's low is broken on Friday, we may reenter the Short side. That depends also on my date with Yasi. (She said yes to me, and I will have my first date in 25 years!)

DAILY and WEEKLY LOSERS:

For the reason mentioned above, let's lower our stops to breakeven (900.00 Jun.). Lets just pay comissions. I will be dating Yasi on friday, so I am nervous and after I see what happens on Friday I will decide what to do. If she dumps me I will be depressed, so we will sell the market again. If I she has sex with me, I will be the most bullish in 25 years!!

Glenn Loser "Flipper" Neely

[Mike McQuaid]

S&P 500 variation on Gartley, spinning top Feb 9 to the doji March 6 clusters a 127% extension to 161% of March 6 to 25th and just happens to be at the May 8 high.
The point is if yesterday's 878 holds the cluster gets tested and shows a range. The tops in Jan and Feb also project this range. Range bound trading is simple and simple is good. If the range gets broken it'll indicate future direction.

[razepy]

to Glenn Loser "Flipper" Neely
repeat100x:
je ne fais pas chier les autres avec mes propos insensés

go to hell

[Mamma Boom Boom]

DG, your 'amazingly simple-minded'. We've been through this before. Why do you bring it up again? Did Neely 'zing' you yesterday. Like the time he stuck with an entire portfolio of calls, just before the bottom fell out, in 07. Damn that hurts!

Let me explain to all the others: I have my website divided into 3 investment time-frames. Most investors fall into those descriptions. (1) day traders (2) those who turn a portfolio once or twicw a year (3) those who hold forever. Throughout the timeframe that DG is referencing, I recommended LT investors stay out. Which, any fool, with reasonable hindsight, looking at the past years market, would agree that was an excellent call. At the same time, LT investors were very overweighted in bonds, treasuries, corporates, and junk. That was the big LT play, and it did great. We sold all bonds in Jan 08, right near the top. No pain...only profits.

I've said it before and I'll say it again, I will match my timing expertise against anyone, in any of these timeframes.

I thank everyone for their time, and try to forgive 'rednecks' like DG. It hurts to lose money.

Ned Bushong

[DG]

Ned,

Unless you are under the delusion (which wouldn't surprise me, given your generalized delusions of grandeur apparent in your postings) that Warren Buffett is reading your website for truly "long-term" market analysis, your excuse for missing a 100% run-up in the S&P is feeble at best and that's why I bring it up. Even my grandmother can handle two trades in five years.

Yes, that loss in 2007 was not good, but that's the market for you and I'm a big boy. Despite that loss, Neely has added more value to my trading than reading your sexually-innuendoed drivel any day of the week. Christ, go out and get some and spare us the mental imagery why don't you.

FYI, I was already out when Neely said to get out yesterday, just as I was already in when he said get in the day before.

[john walker]

Yelnick,

You wrote today "Dollar weakness means Dow strength." Two questions, please:

(1) Haven't you written in the past that the dollar's weakness was a cause of the market crash of '87? [I don't have a URL to cite, so my memory may be failing.]

(2) Why on earth would a weak dollar lead foreigners to buy US bonds or equities? If you agree that foreigners will be inclined to /sell/ US bonds (raising US long-term rates, including mortages) and US stocks, then why are you confident domestic purchases will exceed foreign selling?

In short, I don't see the linkage (today, given current events) between a weak dollar and a market rally.

Many thanks.

[DG]

John,

Not speaking for yelnick, but the way I've seen it portrayed, dollar weakness means increased risk appetite, which is good for equities in general.

[john walker]

DG,

Agreed re "accepted view", and agree that there is some linkage generally , e.g. US investors sell $ to buy into "emerging markets", etc. However, there is an equally strong linkage between rising interest rates and falling stocks. ("Equally strong" = with exceptions, but still a good bet.)

Today, US$ weakness, noise about ratings (absurd, but still there), all serves to make any foreigner /wary/ of buying US assets. So, you have to believe that US buying will offset foreign selling /and/ US. I just don't see the math.

[Mamma Boom Boom]

Ok, school's in........

Let's play a game, let's have some fun. What I want you to do is to pick a date that the words, showing below, will be uttered by our illustrious new president(Bam-Bam). If you can't figure out what this has to do with markets let me give you a hint: dollar strength, selling bonds, corporate profits, international prestige, increased GDP, well you get the picture.

Here it is: "...Our goal has always been, and will remain, to partner with those in Pakistan who seek peace, and who seek prosperity. But now we are faced with an impending disaster that that we cannot, we must not, ignore. While the Pakistani forces have fought a courageous battle to repel the terrorists at their doorstep, the battle for the very soul and survival of humanity is upon us. Talibanized elements have captured a weapons depot outside of Islamabad. Our intelligence confirms that these forces are massing for an assault on Islamabad. We must stand with the people of Pakistan in repelling such an attack, and in doing so disarm and destroy these radical forces once and for all. And so it is with a heavy heart that I have instructed the Joint Chiefs of Staff to..." (written by Dan W)

Make your guess with a month and a year. The winner gets an all expense paid vacation to __________? I haven't decided yet. Have fun kiddies.

[DG]

John,

I actually agree with you that past is not prologue here and that dollar weakness is not necessarily a matter of increased risk appetite, but a sign of the beginning of the next phase of the economic crisis.

The only reasonable plan I can think of is to short the market and hope my profits don't get confiscated as "unpatriotic" or some such thing. I don't think anything is going to be rising, other than pain levels.

[john walker]

DG: Agreed.

Yelnick: Still waiting on you ....

[yelnick]

john walker, in 1987 we talked down the Dollar in coordination with the Germans (mostly) and it fell in half. At the time Dollar weakness was a planned devaluation to increase US competitiveness vis a vis the Japanese. It led to the '87 crash and the Japanese bubble - almost overnight the Yen doubled in value. At that time we could easily finance our deficits as we had only recently switched from a net creditor nation to a net debtor.

This time around we need to borrow $1T over the next four months and the Chinese et al. are selling into the auctions, not buying. Y'all probably saw the news that the S&P may downgrade the UK Gilt, and the UK is trying the same QE that Bernanke has started. Hence Dollar weakness is due to the fear the US is facing an eventual hyperinflation for having monetized (printed money to finance) multi-$T deficits that stretch out for years. Or put simply, the overseas investors will seek higher rates to manage the Dollar exchange rate risk within Treasuries.

In such an environment, where do overseas investors place their Dollar holdings? As the Dollar drops, the Dow looks cheaper in other currencies; in other words, the Dow in Euros or Yen is an attractive place to plunk Dollars and provides a hedge against weak Dollar value. Key point is the Dollar holdings have to move somewhere.

One reason this 'rally' is not sustainable is we see the same phenom that we saw in the later bubble days, where all markets were linked and tended to rise as the Dollar fell. Viewed from London or Dubai, this made sense, as the Dow hedged the Dollar.

It is not clear when the Dollar Crisis will hit. When it does, I expect this linkage to break - equities drop with the Dollar. Conversely, if deflation hits first with a vengeance, Dollar will go up but equities will drop. Tragically, Treasuries will also go up even though theory says they should drop, due to the need to finance horrific deficits. The higher nominal rates demanded will exceed the increase in real rates due to deflation.

[ino]

1. I think the dollar weakness has nothing to do directly with the stock market. The FED monetary policy, the $2T liquidity, the new money created out of thin air, does. This moved from FED accounts against Treasuries to TARP funds, from TARP to bank capital accounts, and mostly moved from bank accounts to hedgefunds, bank trading desks, and some found its originaly intended way to real borrowers. And all this has a multiplicator effect.

This money drives the current stockmarket rally. It made the financial boys happy, and lends a rose-tinted glass to a lot of people.

However this effect looks partly/mostly spent. The market seems stalled since 2 weeks. The "glass of whiskey" liquidity the market got was fine.
But all the cold facts remained. The real economic problems are unsolved. All of them. Expect the next long downleg. The $2T shot dissipates fast against $10-20T size problems.

2. Take a quick look at the hourly chart.
Focus on the last 2 days, from 5/20.
Looks like a classic impulse down, waves 1 and 2 complete,
and 3 just started before Friday market close.
If this is right, a short position Monday should make money.
And would fit in nicely as a 38%-62% correction (b) from 5/7 top,
with 820-780 target range.

[vipul garg]

gold is the key here
if the count on gold is correct , the king metal is ready to move to 1200$ or higher.!one small leg down and the blast is ready to higher levels.

so is it signally coming hyperinflation due to print money, and safe heaven buying due to equity drop worldwide.?

[john walker]

Yelnick:

The answer to your query

>In such an environment, where
>do overseas investors place
>their Dollar holdings?

is, imvho: they will /sell/ their dollar holdings IF they expect the US$ to decline further (foreigners don't pay cap gains taxes, so they can exit/enter as they wish). It is the same scenario as in '87...and it is coordinated in that Geithner's twits (Sachs, Summers, Rogoff - all the geniuses who have brought us the IMF's fiascos and our current situation) are /explicitly/ pro-US$-weakness.

p.s. Yelnick, what is your current US$ outlook? Last I recall, you expected deflation & a rising US$ (and I agreed, so this isn't a dig, just a request for your current thinking.)

Thanks !

[Upstart]

Cycles wax and wane, but look at the 3-yr chart of the DOW or S&P and back-test these cycles (Most skip a beat at least once; just keep going.): 1) A 5-month cycle from 4/09 (This is the one that I said was bottoming and confirming the end of the triangle in April.) 2) A 4-month from 3/09. 3) A 7-mo. from right now - the weakness we're seeing now.

Two points: If the 7-month is still active, one can imagine that the present sideways funk is about to lift for one more spurt higher. And the other two cycles do not bottom in June, so presumably there won't be much downward "tug" in June, at least not in the first half. The next "hits" would be July, September, December.

[Upstart]

The above will only take about 3 minutes. Check it out.

[Forkoholic Serge of Elliott Wave Forkology]

Gold in ABC up. Elliott Wave Forkology Update

Sorry to disappoint Gold Bugs waiting for Wave 3 up. I was thinking why I can't fork gold as an impulse from 1999 low. The only logical conclusion - it's NOT AN IMPULSE but an ABC UP. Here I just flipped gold chart and you can see it's an ABC. I'm not saying it can't go up, I'm just saying it's not an impulse. Definitelly not an impulse.

http://forkoholic.spaces.live.com/blog/cns!233C658FDE78D41A!526.entry

[Neely Fan]

Hey DG or anyone else. Has anyone taken Neely River Theory trading courses?

I have and would like to talk to you if you have. email me at [email protected]

thanks!

[Australia]

We are actually at a very critical level in the GBP$, EUR$ and $CHF, with strong potential for a significant reversal back to $ strength.

It is my belief that people overanxious in looking for the inflationary period. What is more likely is deflation followed by a sharp reversal to severe inflation.

[jfp]

Anyone know how to calculate McHugh's pih-mate? Also, when is the next one? And the dollar will bottom between May 26- June 3, which would be an ideal time to short an intermediate top in FXE. Thx!

JFP

[Rob]

McHugh's last phi-mate turn date was May 20th. The next one is July 17th. He is saying the last phi-mate turn date actually turned out to be May 18th, not May 20th as earlier estimated.

His current thinking is that July 17th may be a top.
For what it is worth there is an important Bradley model date of July 15th.

He has a Fibonacci Cluster Window from May 20th to May 28th. He expects the market to decline through the coming week. He has another Fibonacci Cluster Window form June 9th to June 17th, which he says could represent sent the bottom of this A up, B down, C up move, ie. the bottom of B down, with the last leg up in this rally to follow.

Don't worry about how phi-mate turn dates are calculated. They are driven off the January 2000 peak of the DJIA and subsequent tops and bottoms since that date. He then calculates Fibonacci numbers based on various tops and bottoms. Let him worry about the math.

The accuracy of a turn in the market at the time of his phi-mate turn dates is uncanny to say the least.

[DG]

Neely Fan,

I am thinking about taking the River course, but have not done so. I am pretty focused on trying to catch this next turn, which could be a turn of some real significance and think it might be a mistake to try to learn some new techniques right at the moment.

I am guessing from your screen name that the experience was profitable for you, so that is good to hear.

[Glenn Loser Neely.]

URGENT MARKET UPDTATE.

Sell the market immediately!!
Yasi dumped me. My date was a disaster. No sex.
That means the market is going down.

Glenn Loser Neely (alias "Flipper")

[ss hari]

your insight of weak dollar with run to hedge by buying into dow is mind boggling.then how indian bombay market will behave with this link unfolding.kindly advise and all small investors will be grateful to you as there is frenzy in indian market and no guidance is coming forth from reliable sources.with regards.

[yelnick]

ss hari & john walker - we seem to be at risk of a Dollar meltdown. The US Treasury market was down sharply last Thurs and Fri. How to finance the huge global deficits? Who will finance them? The bond market seems to have grown concerned, sparked by the S&P thinking of downgrading the UK government debt rating. This raises the unthinkable - a downgrade of the US Treasury. If the US Treasury Bond rating begins to fall, where is there a safe haven left?

When US equities and the USD both fall - delinking this inverse correlation of USD and Dow - it will pull down global markets in a next wave of market meltdown. Indian markets as well. This will show up the recent frenzy in the Indian markets, and other global markets, as but an irrational 'bubble echo' of the 2007 period of frenzy.

There is a lot of chatter this weekend of a Dollar Meltdown, but the wave count suggests that the USD is or is close to bottoming from its recent weakness, and the Dow seems likely to fall next week. The inverse correlation will stay intact, for a time.

This last few days, and the heightened concern this weekend of the Death of the Dollar, may be a harbinger (a warning sign) of the meltdown to come, but it might not come quite yet.

[RNB]

Yelnick,

I am guessing that the only true safe haven may be commodities. Since people need to eat or burn oil, commodity prices may remain constant on a real basis or higher on a nominal basis.

[Mike McQuaid]

The NDX is on the verge of a 50-200dma golden cross. A nice measure for this index will be to stay above the 200dma. The double bottom on this chart is compelling in concert with the anticipated golden cross.
Volume has been decreasing the last 12 days just after a hanging man. I have a hard time being bearish on this chart, the bull bias seems more likely.

[EN]

I took Neely's course 3 years ago. It is basically a form of trend following that works with channeling. No waves at all. It is VERY simple.

It will keep you on the right side of the market during strong trends but you will get killed in choppy markets using only it. Often, you will wait and wait and wait, with no trades. But, you will not lose too much money following it blindly because it does not allow you to fight the trend. If there does develop a big trend, you can rest assured you will be in on it using it - but how many small losses will you have to take getting whipsawed?

Its great weakness is that it does not consider pivot points and moving averages. I use only certain aspects of it and rely on pivots and moving averages mainly. Hurst cycles are also part of my method.

I think you may be disappointed if it is your only method of trading. To me, it is just one more tool. Not a complete method. That is probably why he still only seems to use it in combo with wave theory.

[Al fro Oz]

Anyone who wants to go long on market index's at this point in time must have had their part of the brain for memory removed when they had their labotamy. Ore else they are 'of the set' walking the decks of the Titanic so drunk on champagne they dont realise the signifigance of a Ice-burg and laugh at it instead.
Gold's been rallying steadilly but firmly. WIll it break its 1030 high, looks like it could.
If we havn't seen 'The' high in the SPX @925 then I beleive we will see it in the nextt week or so and it will be a steady staircase leading down from there on in untill we reach the low 500's. If you can move your funds to Cash the now is the final call.
Notice how Oil has come up to @60 Barrel which is where I said it would find its new level.
US debt is 98% of GDP.
Britains bebt is 68% of GDP.
Australias debt is 29.3% of GDP.
Hope Oil doesnt dive like it didin '07 '08. If it does the US Economy will be in more trouble than Brick Bradford.
Last week the British Pound got hammered, and those in the USA say their Dollar will stay strong?
What are they smoking?
When China, Japan and the Saudi'es want to devalue the US dollar they will. It just a matter of time.
The rubber hits the road for Obama now. Better have been spending money on Infrastructure and better be able to spend money on Infrastructure until the cows come home cause this is going to be a prolonged financial winter.
Australia is banking on a steady Chinise growth of 4 to 5% P/A for the next 6 years.
Unfortuanatly we have a Treasurer who smokes whatever your guys indulging in the "Llast Horrar" are smoking over there.
You can smell marketing. Recently the media were jumping up and down clapping singing and dancing saying "you know this recession might not be that bad at all". Thing is they only sucked in the die hard SUCKERS and there are very few of them left.
Cheers
Al
Cheers
Al

[Al from Oz]

EN,
I've done Glenns course as well. Sure its not the only thing I look at but I have to disagree with you on one point, "it does not consider pivot points"
EN,
Its strength IS PIVOT POINTS. It times them to perfection more frequantly than not. Have a look a the last 10 years on Gold for example. Very nice indead.
Glenn timed the top in the Stock markets almost to the day. Incedently he forcast it 4 years ahead of time. Sure Glenn said there wouldn't be a bounce of any signifigance on the way down and we got a 300 point rise in the SPX but you need to understand how Gleenn views the market once its turned. WHen it toped all his personal positions were shorts. Because his positions are for the long haul he personally doesnt really care about intermediate rallies until his criteria for the next major turn (the one from the bottom of the short position are met). He cares about his service members who want to trade against the trend and trade intermediate rallies that could last a week a month or 3 months but I detect that leen isn't really focused primerally on them. He will tell you when next to go long. Rest assured he will get that right too. Glenns system complements another method I utilise which also finds pivot points from COTS and price movement beautifully. They are from totally indipendant analysis techniques but Glenns methody say exactly what the others are saying when the others change what they are saying. They are syncopated even though they are indipendant.
Cheers
Al from Oz

[Rich S]

It will keep you on the right side of the market during strong trends but you will get killed in choppy markets using only it.

Sounds like hundreds of other methods that fail to stand up to rigorous back-testing. Almost anything makes money during a well-defined trend. Can River's rules be programmed and implemented as a mechanical system, or is it discretionary?

[luis]

Is it time to invest in oil and DXO?

[Bears and Bulls Get Burned]

Al from Oz--

The US balance sheet has been crappy for a long time. Problems you can see don't tell you what markets are going to do. We could resume the great bull market even now.

Be careful.

[EN]

By Pivot Points, I mean the following: http://www.mypivots.com/calculators/pivot-point-calculator.aspx

Note the s and r levels on the channel lines.

You can program the method to backtest it as there is no discretion involved.

[james T]

Al from Oz

"Glenns methody say "EXACTLY" what the others are saying when the others change what they are saying".

what's "Glenn's method" that you are referring? river technology? River technology is not strategy, and rather difficult to interpret. Can you explain further..

[Upstart]

Lookin' good!

[Upstart]

Carl Futia looking for 950-980 range in June. That fits perfectly.

[vovor]

Hi Dear Wave Followers,

Has anybody ever tracked Prechter/Neely's track record?
I would be very interested to read some statistics like their success rates or average P&L for starters.
DG recently posted some interesting material about that but only since last October.
I'm sure a lot of readers here would appreciate that kind of insight. They'd help make a decision on whether these mentor's paying newsletter offer value or not.

Best Regards,
vovor

[small martingale]

I have tracked Prechter and Neely's track records. They are both excellent. You would be a fool not to subscribe to both services.

Also, if you are serious about trading, you should also get yourself a good coin that you can flip. It, too, will provide you with a reliable foundation for trading.

Lastly, be sure to have an infinitely large bank account so you can double down after every losing trade.

Good luck.

[EN]

There is no Prechter track record. He has been bearish on stox since 1987 long term. They have a short-term update but it does not offer recos. When I subscribed to it, it was so bad you could make money by buying when they were bearish and selling when they turned bullish. Read: contrary indicator.

As for River Technology. It has certain rules and is non-discretionary. Therefore, interpretation does not enter the equation as with wave theory. You will lose less money with "River Technology" compared with Prechter's crew. However, I think Neely is charging many thousands for the course these days. To me, it was worth no more than what I paid, which was 1800 USD.

[Tom]

Only FOOLS subscribe to those salesmen. I was among one of those in the past and paid heavily for it.

You can never make money for yourself if you do not have developed your own trading and risk management method. There is no shortcut to wealth, and the shortcut to wealth that those salesmen told you by subscribing to their service is indeed the shortcut to poverty.

[anon]

the shortcut to wealth is just to buy every dip in this market. it just keeps going higher, amazing..i bought this last dip and am already up bigtime. i just dont understand how anyone can be bearish in the face of this action.

even when it dips for a few days, the media will put out a press release like today's "consumer confidence" number, to kill all the non-believing shorts and fuel it right back up!

When I buy the dip, i can confidently say that Bernanke, Geithner, Obama and now even the media is guaranteeing my stellar return!

cold hard cash, growing my account and it is just so easy..i think we will be at new highs by Christmas

[DG]

My best advice to anyone is to subscribe to Neely for 3 months. That is a good sample size to see if it is for you or not. It will cost you around $150 to do so. Trade a portion of your capital according to his recommendations and see where you end up. There's no guarantee you'll end up positive for that time frame, but at least you'll get a flavor of his methods. He might even end up standing aside from the market the whole time, if the wave count and Neely River aren't clear.

A consistent method that has an underlying logic that is in tune with the market's current state and cuts losses at the instant your trading hypothesis is wrong is the only way to win at trading. Go back and read Livermore, who says that trading is the most unnatural thing a person can do, if you're doing it correctly.

[da bear]

TBT, the bearish play on long term US treasuries is rocking, and gold is hanging tough. others are calling for a big bad dollar "event" soon. i wouldn't bet against them...

maybe we get a crashing stock market with a crashing dollar this time. lol

da bear

[Tom CZ]

Guys, if you look to eurusd risk reversals getting strongly in bets for weak dollar - your trade is getting little crowded. I am expecting reversal soon against 1,41. Equities may get sold out because of bonds sell. The point is that bond sellers mostly usd reserve guys so do not need to sell buck as getting out of bonds. Carry guys lowering risk by reducing dollar funding may cause its firmness then.

[Tom]

This is the other "Tom". I have been subscribing to Neely since October and have to say that he is the most accurate forecaster out there. In fact, I have usually gotten burnt when I go against his recommendations and take the other side of the trade. That's just my experience. Prechter is not nearly as accurate, but he provides much more insights into what he is thinking. As a beginner Elliotician, I found his newsletter to be very helpful in learning the Theory, whereas Neely is much more succinct with Neowave.