Dollar Breaks Again

There are some signs of improved growth in U.S. rail traffic and home construction remains a bright spot, but otherwise I don't see a pickup where it needs to be, in credit. I still expect China will pour cold water on the rally. As the euro climbs higher, pushing up unemployment, and the swelling migrant population pushes up the crime rate, the populists will only increase in strength.

However, the chart is the chart. A lot of markets are extended (overbought) such as coal and steel. I expect U.S. tariffs, owning U.S. steel producers is a good target. If the weaker dollar lifts all boats, natural gas is still dirt cheap. If a stock like SWN can get above its long-term trendline, I'd be a speculative buyer. Gold has started moving; another high beta pick is gold and silver miners. With a nod to silver for the most aggressive.

Caution is warranted here because of the early run in January. I also see some parallels to the start of 2008 with oil and commodities going vertical, oil climbed 50 percent (and $50 a barrel). The economy had already turned, but the financial markets didn't get the memo. I don't get the sense that markets expect weakness in China.

The dollar also did a throwover in August before it reversed.

As I wrote before, 2018 is the The Pivot Year. The break in the dollar warrants shifting some chips in the direction of commodity plays and related emerging markets. But many of these charts make me think the break in the dollar is a culmination move, at least in very the short-term. Intermediate-term, I have to respect another downside break as indicating the trend.