The December Dollar Index is up 19.5 ticks at 76.325 this morning as I write. This small rally today has come on rumors of possible interbank intervention from some Asian countries to try to prop up the dollar. You see, most Asian nations depend on their exports for financial stability, and as the dollar keeps falling, the world finds the US as the cheaper place to buy their goods over time. At least, that is what those countries are worried about. Those countries need to go back and look at what happened in the 1980’s when countries intervened all the time. They found out back then, that the world market is bigger than what a country or countries can do to artificially prop up a currency. They end up just wasting currency reserves. It is and shall always be my contention that free markets will correct themselves and the real fundamentals will always rule, no matter what you do to stop them. When governments or other entities try to control what a market is doing, most of the time, they just make the situation worse. A market is going to go where its fundamentals justify eventually, one way or the other. Knowing what the real fundamentals are, to me, is very difficult to know as time goes on. That is where the charts come in. The charts are continually telling what the fundamentals are over time, not in one day or two of volatility, but what the overall trend shows. In the case of the dollar, the overall trend is down for a reason. Countries can try to stop the slide, but I believe that the dollar will eventually fall to where it is fundamentally justified, one way or the other. For now, I am flat in the dollar index. I want to get short at some point, but I would like to do that with options, but the liquidity in the dollar options is lacking. I may begin following the Euro soon where there is more trading volume.

Oct. 9, 2009
David Hall