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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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