Over the past week, we’ve been investigating dollar sentiment, which appears to be overwhelmingly bearish at the moment.
The problem now is everybody – and I mean EVERYBODY – is bearish on the dollar. It’s a doomed currency, and everyone is expecting its eventual demise. Of course, that was the case last December as well, just before the dollar kicked off a three-month rally that boosted the greenback 12% and sent stocks and commodities reeling.
From a contrarian point of view, a bottom in the dollar is near. Too many people are betting on its demise. And while they may eventually be proven correct, the market is likely to make them suffer in the short term.
We’re probably no more than a few days away from an important short-term bottom in the dollar, which means we’re probably close to a short-term top in the stock and commodities markets. Given the extent of the selloff in the dollar and the rally in all the other markets, a counter-trend move could be substantial.