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Commentary Topic from greenfaucet

Oil Short - Dollar Long?

Say What? All the talk in the media about the downside of the US dollar! I am not convinced short term the dollar continues lower. The dollar index has found solid support at the 75 mark and this could be setting up for a snap back bounce. The technical indicators are pointing to the index being oversold as well. Watch the dollar and remember the link between stocks and the dollar has been strong the last couple of months, meaning a bounce in the dollar would potentially be negative for the broad markets. The chart below shows the support level on the dollar index and the potential level of a short term bounce.

 

To take this one step further would to be a look at crude oil, which is priced in dollars, to react negative to a bounce in the dollar as well. As you can see on the chart for oil the short term downtrend in play along with support near the $76.50 level. A stronger dollar could push this through support and down near the $72 mark. Watch oil to move lower if indeed the dollar moves higher.

As with any investment, you the investor need to have a strategy and disciplined approach to investing. Without this you are putting too much risk on your money. The opportunities in the market continue to develop both long and short as the uncertainty builds. Stay disciplined, stay focused and protect against the growing risk whatever you do while  investing.