Do These Headlines Look Like a Healthy Economy to You?

Following a relentless barrage of recessionary industrial and manufacturing data, moments ago the Business Roundtable released its latest, fourth quarter 2015 CEO Economic Outlook Survey, and it is an absolute disaster.
According to the report, for the third quarter in a row, CEOs expressed growing caution about the U.S. economy’s near-term prospects and indicated they are moderating their plans for capital investment over the next six months, according to the Business Roundtable fourth quarter 2015 CEO Economic Outlook Survey, released today.

 ISM Manufacturing, a key manufacturing economic index has now fallen below 50 for the first time since Nov 2012, crashing to 48.6! This is the weakest since June 2009.

Today was the weakest PMI report since October 2013 (as ISM Manufacturing also dropped to its lowest since Dec 2012).

 

The chart above is the percent of stocks in the Gavekal Capital International DM Americas Index that are at least 10% off of their 200-day high. A stunning 55% of DM Americas stocks are at least 10% from their 200-day high while the DM Americas Index is hovering just below its all time high. That's startlingly concerning! 

Canadian GDP plunged 0.5% - its largest Month-over-Month drop since March 2009 and the biggest miss of expectations since Dec 2008. Good thing stocks are up 100 today, or we might have thought the economy was weakening!

Aussie, Loonie Parity

The Aussie has now passed parity, is worth more than the US Dollar.

And the Loonie (Canadian Dollar) is close to reaching parity.

Dumping Dollars: Russia Diversifies Reserves

Russia may add the Australian and Canadian dollars to its international reserves for the first time after fluctuations in the U.S. dollar and euro.
“Adding the Australian dollar is being discussed,” Alexei Ulyukayev, the central bank’s first deputy chairman, said in an interview at an event hosted by Bloomberg in Moscow last night. “There are pros and cons. We have added the Canadian dollar but haven’t yet begun operations” with the currency.

Devaluation of the Dollar

Compare the charts of the Dollar with the other currencies below. Why is the United States government devaluing its currency and intentionally stoking the fires of inflation?

US DollarEuroBritish PoundAustralian DollarCanadian Dollar

Buy Canadian!

Buy the loonie! Today at least! This was one of the opportunities I uncovered by using my timer alarm to scan frequently for opportunities.

Canadian Dollar Skyrockets

The Dollar Get's Pummeled Today

The Dollar's reversal of fortunes is significant today because the Dollar's drop has wiped out an entire week's worth of Dollar gains. The perception that the Dollar would benefit from the weakness of the global economy has been a good trade over the past month, but that perception shows signs today of having run its course. All the major currencies are significantly higher against the Dollar today, including the Euro, the Australian Dollar, the British Pound, the Swiss Franc, and the Canadian Dollar. The Canadian Dollar especially has held its own against the US Dollar over the past few weeks.

Greenback on a Green Streak

As the Dollar bull continues to gain momentum, other currencies are falling like targets in an arcade game at a county fair. The irony of all this is that the U.S. economy is not doing well at all. It's just is is considered to be less bad than most others.

ECB head Jean Claude Trichet this morning acknowledged overnight for the first time that economic weakness in the European Union now outweighs the risk of inflation. This just one month after he raised interest rates to combat rising inflation. Now, it appears that he may be forced to halt his rate tightening schedule to prevent further damage to European economic prospects.

The Dollar appears to be the trade du jour for the time being. Note below the connection between the Dollar's strength and just about everything else! The next time someone questions the link between the Dollar and commodities, just show them this. The next time someone says that having a weak currency is good for the economy, show them this, because that's hogwash! Having a strong currency is the single most anti-inflationary policy that can be implemented. Even maintaining a strong currency against other world currencies helps to keep inflation in check because it helps to prevent importing inflationary prices from other countries when the United States imports their goods. As goes the Dollar, so goes inflation. They move inversely to each other.

US Dollar -- On a Green Streak
Euro - almost a mirror image of the Dollar
Gold
Crude Oil
Grains
Australian Dollar
Canadian Dollar
Great British Pound
New Zealand Dollar
Swiss Franc
Chinese Reminbi Yuan
DJ Commodity Index futures

Three More Currency Trends

Here are three more downtrends. This time they represent reversals of sentiment in three of the worlds strongest currencies. Two, the Australian Dollar and the Canadian Dollar, are tied to the downtrends in commodity prices in recent weeks. The Aussie and the Loonie, as the two are known among Forex traders, are known as "commodity" currencies for this reason. The Loonie also seems to be hit by its close relationship to the U.S. economy, according to a Bloomberg article this evening. Note in the charts the engulfing patterns on the Loonie and Kiwi charts.

The third one, the New Zealand Dollar, has had the highest interest rates among the developed nations of the world, but economic weakness has forced the Central Bank of New Zealand to recently begin lowering interest rates for the first time in several years, and the Kiwi's strength has begun to wane as a result.

One reason why I am always scanning the financial markets for existing trends is that once I find one, one of the easiest ways for make money in futures is to find an existing trend and then position myself to enter that trend. One must first find a trend, before one can trade it. Lately, I have set a goal for myself to scan more broadly to locate trends, so that I can ride those trends like a surfer rides a wave. Here was a post from a few weeks ago on the subject:

Don't Just Trade With the Trend. Find It!

Australian Dollar (Aussie)

Canadian Dollar (Loonie)

New Zealand Dollar (Kiwi)

What Happened to the Canadian Dollar?

Hint: The fate of the Canadian Dollar is closely tied to its exports in oil. The Canadian Dollar is considered to be one of the "commodity" currencies, because the value of the currency, like the Canadian economy, is closely tied to the value of its commodity exports.

This chart shows the US Dollar paired against the Canadian Dollar, so this chart moves inversely to the value of the Canadian Dollar, also known as the Loonie.