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Where
are we in this investor sentiment cycle?
Update from Dr Janice Dorn, M.D. Ph.D, Trading Psychiatrist
24 Oct 2008
We are now on the brink of complete revulsion. The manic-depressive
markets are off their lithium and breaking down. For those
still holding and hoping, it is the area (see drawing above)
of capitulation, despondency and depression. Fasten your
seat belts because--absent a mid-morning miracle-- it could
get ugly.
Trade deficits in the trillions and forced deleveraging
is behind the rise in the $US. The story that the U.S. is
safe haven because we are doing less poorly than the rest
of the world is also a contributing factor. How long this
can continue is unclear as the dollar is now at previous
resistance levels and now needs to be watched
To see if it can blast through or if will pause before making
up its mind what to do. Looking at correlations, silver
seems to be forging out a bottom, being up some 4% today
in the face of a strong dollar and weak gold. This is of
interest and we will be watching closely over the next few
days. It is only a matter of time before the currency markets
come to what is left of their senses and the dollar resumes
its downtrend. Currency traders who have been trying to
short the dollar are being stopped out repeatedly.
As I write this at 12:23 AM EST on October 22, the dollar
has blasted through yet another resistance and is trading
at 84.40 and is now trading at 85.81. Margin liquidation
in the forex markets is among the most violent in velocity
of any market.
More from Dr
Dorn at www.thetradingdoctor.com
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