Dollar Slammed as Data Dives — Does a Major Collapse Loom? Mike Larson | Monday, May 2, 2016 at 4:30 pm
The U.S. dollar can’t catch a break. Lousy data on GDP, retail sales, durable goods and industrial production in recent weeks have pushed it relentlessly lower.
Then this morning, the ISM Manufacturing index came in at 50.87 for April. That was down from 51.8 a month earlier and weaker than economists expected.
Sub-indices that track new orders, production and order backlogs all declined from March, while one that tracks manufacturing employment remained below 50 for the fifth month in a row. That suggests we’re still plagued with layoffs in the factory sector.
Result: The Dollar Index (DXY) is on the cusp of a major potential collapse. Take a look here at this weekly chart and you can see that we’re flirting with long-term support around 92.50-93, support that dates all the way back to January 2015.
What next for the dollar?
Of course, select leading currencies are performing much better against the buck. My favorite is the Japanese yen. I recommended a few different ways for my subscribers to profit from gains in the yen months ago, and am pleased to see it just hit a 19-month high. There’s another currency that should be right behind it, and if it breaks out as I expect, it could really soar. I’ll have more for you in future updates.
Meanwhile, I suggest you strongly consider adding some dollar hedges. Gold and gold shares are one option. So are foreign bond funds or ETFs, which rise in value when the dollar falls.
Multinational stocks can be a third investment vehicle … but only IF they don’t have excessive economic sensitivity. I get so angry when these dime-a-dozen talking heads go on CNBC and say: “These companies will make more as the dollar goes down because their foreign sales will be worth more in dollar terms. Buy, buy, BUY!”
News flash, guys: If the dollar is going down because the U.S. economy is stumbling toward recession, that isn’t good for cyclical companies! Their underlying fundamentals, sales, and earnings will deteriorate along with the economy, more than overwhelming any positive influence from currency fluctuations.
So first, keep your eye on the dollar. If it breaks sharply, that requires portfolio action on your part.
Second, don’t listen to quick, off-the-cuff commentary about what a dollar drop means for your investments. The reality is a lot more nuanced.
Third, take advantage of the multiple venues where I go into much more detail about what to do in this volatile environment …
For one thing, I just held a very important call with my colleague Mike Burnick. I hope you tuned in earlier. But if you missed it for any reason, you can still catch a recording of it online here for a limited time.
For another thing, I’m going to be providing a pair of detailed briefings on the economy, the markets, and how to profit at the MoneyShow Las Vegas. It runs from May 9-12 at Caesars Palace, and you can join me by clicking here, or calling 800-970-4355, to register today. If you call, please mention priority code 040948.
What if you can’t make the trip to Nevada? Well, you still have the option of “attending” the MoneyShow Las Vegas Virtual Event online. There’s something for everyone, with advice on fine-tuning your strategies and mastering the latest concepts, to simply learning more about investing and trading from some of the best names in the industry.
You can register for free using this link. Then you’ll be able to watch one of my presentations, as well as over 30 more interactive sessions and discussions.
Meanwhile, if you have any other thoughts or comments you want to add – on the dollar, the yen, the U.S. economy, or the markets overall –please make sure you add them in the discussion section below. This is no time to hold it all in, considering the incredible recent volatility and key developments in several capital markets.
Poster Comment:
Dollar chart at source. See for yourself just where we stand and be prepared for the collapse.