Who let the Bears out?

The dollar fall put downward pressure on the stock markets and we saw some really volatile days beginning this week. However, after an initial sell off on Tuesday morning by panicking individuals who had put in at-the-market orders, the institutional buyers were coming in pushing the Stockholm index back to unchanged levels. The buying continued today Wednesday and we are up over 1.5 percent at the moment. US GDP 3rd quarter was better than expected at 2.2% and the the European markets continued up. The longer trend is still up and I buy the pullback if nothing more severe is to happen.

Dollar continues to sink

The dollar continued this weeks downward trend today setting a new 19-month low against the Euro. The fall was exacerbated by thin trading and a stronger than expected Ifo figure yesterday. The recent dollar devaluation and its increasing volatility put pressure on the stock markets in Europe and Japan. I think this dollar slide is inevitable and will continue after a few days of consolidation. A lower dollar will ultimately make the US firms more competitive abroad and help the US economy restore equilibrium. From a European perspective I will look for buying opportunities again in the US markets when the downward pressure on the dollar is over. Also, remember Gene Epstein's case for a 5 percent plus dollar revaluation. Ergo, whichever scenario, it will be buying opportunities soon again. I remain bullish and let the bears stay in hibernation, at least till spring.

Strong Ifo and a Falling Dollar

In Barrons this week, Gene Epstein wrote an article about the dollar ("The Buck Takes Wing") and predicted it has hit the bottom and might rise the year ahead by at least five percent against other currencies. However, the greenback continued its devaluation this week and today it hit a 5 month low against the euro after Germany reported a strong Ifo figure. The fall might be due to traders wanting to clear their books before the holidays in Japan and the US, and the volume today Thursday is very low on the foreign exchange markets. Also, many investment banks could be booking their profits before they end their books. However, the Fed is unlikely to raise US rates further and the ECB is sounding increasingly hawkish. Maybe the carry-traders is also starting to unwind their positions now. We will see if Mr Epstein will be right, but i would not bet on it.