USD Uptrend Still Intact

But for how long?  This is three weeks of movement on the 30 minute chart.  Note that the dollar is trying to bottom and has held the uptrend since the lows, but the devil will tell the tale next week.

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Dollar Uptrend Chances Being Challenged

Though the USD uptrend is still in place, it is clearly being challenged. Below is the UUP, the USD ETF, used so that volume data is available.

Two items of note. First, the blue lines show a typical correction period (a bear flag). In theory, we should be at the bottom of that trend with a correction (rise in the dollar) coming. Second, note the red upward trendline coming from the bottom on October 15. A violation of that red trendline will start dollar selling.

On a separate machine, which is currently showing the 5 minute UUP chart, we have currently bounced off of the lower trendline but face a number of moving averages as resistance. Today is an important day for the USD...

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Excellent Bloomberg Video with John Taylor on Currencies

A definite can't miss.  We don't disagree with much, except perhaps timing.

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How the War on Cyber Terrorism Reveals Intentions On Your Privacy

Though our usual shtick is about markets, we noted that we will be adding some coverage on privacy issues.  Ultimately, through the newsletter and other avenues, we'll be talking about what you can do about it.  From the financial perspective, it should be a well known fact to our readers that we don't expect a fantastic result from our current economic travails.  If history is any guide, and if you've read The Fourth Turning (as we recommended months ago--you can buy it from our bookstore under 'History'), we do not expect society 10 years in the future to be very promising for people that believe in social and economic freedom.  The pages of history prove that the future from where we are is not pretty--and this will likely be on a global level.

As we've mentioned, our goals have shifted from gaming the markets based on these trends to looking at how to achieve freedom in an unfree world (also a great book in the bookstore).  As part of the blog, we will be updating people on some of the goings-on in the world of privacy--for without privacy there can be no freedom.  Each day we post articles on Twitter on the subject, so if you're interested, sign up to follow the tweets.  The blog will be dedicated to more in-depth commentary.

The New Yorker posted an interesting piece on cyber warfare tensions between the Chinese and Americans and the implications on civil liberties (we would call them natural rights, not civil liberties, but that's a discussion for another time).  It's definitely worth the read. 

Of particular interest is the following passage regarding Army General Keith Alexander, the head of Cyber Command and director of the NSA:

...“General Alexander is not interested in communication privacy. He’s not pushing for encryption. He wants to learn more about people who are on the Internet”—to get access to the original internal protocol, or I.P., addresses identifying the computers sending e-mail messages. “Alexander wants user I.D. He wants to know who you are talking to.” [sic]

This brings us to the fundamental issue on privacy: as long as your belief is that some organization (government or otherwise) will respect your privacy rights, then you are doomed to failure.  Look at the recent examples of Facebook, Google, MySpace, countless banks, etc where your data and privacy were compromised.  Do you really believe that if for some reason the government wanted to get some dirt on you that they wouldn't compromise your private records?

The solution is one of self protection.  Only you can rely on you.  As long as you have *hope* that some unknown body of bureaucrats will protect you at all costs, you're setting yourself up to be a victim.  It's your own fault.  You've been warned.

WHEN things really start unraveling in the global economy, will you continue to rely on hope that things will be okay?  Why not take steps now to do something while you can--after the worst case scenario happens, it's too late to prepare.  Contact us directly for more information.  Our expertise is helping individuals maximize their economic and social freedom.

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Grantham Q3/2010 Letter

Jeremy Grantham's latest missive.  Worth reading.  If you're short on time, read page 2.  Nothing really new here to those of the Austrian persuasion, but in short--cheap money creates misallocation of capital and bubbles....
Grantham October

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Mid-Week Report: Dollar Rally Beginning

We're easing back into the complete analysis of the markets simply because of how much time it takes to validate and prove every case AND publish the data and commentary.  That will largely be reserved for the monthly newsletter.  The blog will contain shorter term summary information.

In summary, overextended markets, cyclical work, and sentiment point to a correction with a minor dollar rally and minor stock pullback.  Only if Helicopter Ben disappoints will we have a dramatic correction.  Ben has created a real mess.  The fundamental story is simple enough: if the Fed doesn't continue to pump money, the economy craters and every politician will be hanging from lamp posts within a couple of years.  Expect MASSIVE civil unrest.  (Note: Europe is in the same situation, and due to "austerity" measures, the path to massive unrest is virtually baked in the cake.)  However, if the Fed pumps enough money to support asset prices and give "Keynesian hope" to the masses, then the dollar will crash and the likelihood of MASSIVE civil unrest comes about again.  There is no escaping this trap--only the means by which things break is up in the air, and that, my friends, is what we're trying to keep an eye on.

Short term, we expect a rally in the dollar and a corresponding correction in stocks/commodities/gold.  This trend has just started as we speak.  However, mid and longer term, the song remains the same.  We believe it highly unlikely that the currency of any country will be preserved over its economy.  No politician will have that.  The fault is in government, as it always is.

November 3 is the big day to determine just how much money will be printed in QE2.  The Fed is already realizing that leaking information about QE2 can only set the market up for disappointment.  $500B+ is already baked into asset prices--anything less is a disappointment.  At the same time, the dollar has taken a beating and some economic indicators are better than expected.  Typically, this should be a signal for the Fed to do nothing--but they've set the expectation of QE2 already and cannot afford to do nothing.  What a tangled web we weave...

It is our opinion that we are now witnessing the Fed, by way of the Wall Street Journal, attempting to talk the markets down and reset expectations before next week so the disappointment is not so high.  The Fed has used the term "few hundred billion" in regards to the amount of QE2.  We expect weak markets going into Nov 3 and then an announcement of $500B or more to try and goose the markets on "higher expectations relative to the lower expectations we set a week ago following the massively high expectations we set the month before that."   Phew.  Confused yet?  Imagine how confused the Fed must be...

Today's analysis will focus largely on the dollar and gold...

The dollar/asset correlation conundrum (DACC) is high, which we've been commenting on since before commenting on it was cool...

The implication is dollar up/assets down and vice versa.  Considering that any move in the dollar here is not out of fear (like the credit crisis or the European debt crisis) but is out of short term expectations, we anticipate that any rally will be minor with correspondingly minor moves in gold to the downside.  Longer term charts provide a clearer picture.

Of note is the symmetrical pattern denoted by the orange lines.  Longer term, that must be watched for clues as to what's next.  Any rally in the dollar should not exceed the 84 region--if it does, then panic will set in.  A break above that triangle will take the dollar to roughly 102--likely a long term bull market.  We expect the Fed to fight this trend.  As such, eventually we may see the dollar break below the triangle with a target of roughly 58 over the next year or two.  Note that the MACD is pointing toward a rally.  This is worth watching as momentum is rising, not falling.

Weekly view:

Weekly is clearly showing oversold stochastic, a near-oversold RSI, and a strong trendline.  Watch for a MACD buy signal as momentum has clearly started rising.  A rally here would be several weeks to a couple of months long--supporting the thesis of a move toward the 84 level.

The daily shows momentum has shifted to be dollar positive, and supports a rally up to 84.  What's not shown is that the trend is weakening as the dollar is rising--that's a divergence that shows a change could be fast and sudden.

Our own cyclical look at the UUP, the ETF that tracks the USD, shows a positive turn.

If this move is going to be substantial, we should see a rally that trends for some time.  Here are the scenarios we're watching:

1. Dollar rallies into Fed meeting.  Fed outperforms.  Dollar turns negative on cyclical top.
2. Dollar rallies into Fed meeting.  Fed underperforms.  Dollar rises in trending fashion toward 84 over next couple of months.

We'll see what happens.

The implication is that, on the gold side of things, there's a likely buying opportunity coming up.  How low will gold go?  That's for next time...

If you haven't purchased any physical gold yet, you may want to take advantage of this pullback.  We expect a minor pullback here and an intermediate term pullback next year.  As part of our first newsletter, we will outline our expectations and why.  In addition, if you're concerned with gold confiscation, we have become very familiar with a rock-solid plan for allocated gold investment in a Swiss vault--one that will actually take American customers--and one that will allow for easy pick-up or delivery.  Contact us for details--we will not publish that information on the blog.

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Schedule, Mailing List, and Format Changes

As was noted in the previous post, some major changes are underway for the Dredd Market Report.  What started out as an educational blog is being converted into a "how to" manual for economic and sovereign freedoms.  Previously, it was a rare post that contained any political overtones with a heavy emphasis on technical analysis.  That is about to change, as is the website and our offerings.

First, overview macro technical analysis will be updated weekly with any major comments posted as needed. 

Next, we will be supplementing this blog with more information on protecting yourself.  Instead of focusing purely on the educational side of things, we're going to proactively provide both information and products/services for individuals and companies to protect their privacy, maximize unique investment opportunities, and ensure that you have options in case that "worst case scenario" occurs.  Our focus is on maximizing personal, business, and economic freedom using techniques and programs that we have used ourselves.  We will never discuss any product or service that hasn't been thoroughly checked out and verified.  We want to be your financial and privacy trustee...

We will be offering a free newsletter, with first version scheduled to release in November, to anyone that contacts us directly.  Privacy is of the utmost importance, and no names, email addresses, or any other personal information will EVER be sold or offered to anyone else.  The newsletter will be published monthly and will contain much more in-depth analysis, both fundamental and technical, as well as detailed privacy-related information that will never be published publicly.  Although we strongly work within all laws to maximize privacy, we do take advantage of loopholes.  There is no reason to expose loopholes that will only serve to limit individual privacy in this surveillance era.

The blog site will ultimately be moving to a dedicated server and the address will change.  It will be posted here for the move.  Again, the best way to keep up with our activities is to email us to subscribe to the newsletter.

Now, to the technical analysis...

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Return of the Dredd Market Report

It's been several months since the last posting.  The fact is that the interest level has never really materialized relative to the amount of time required to post the analysis.

So why come back?  Perhaps we're gluttons for punishment.  Perhaps the timing just seems 'right.'  Perhaps it's because we believe we can offer much more now that macro financial commentary...

In the last few years we've been increasingly involved with ways of investing in physical gold in secure jurisdictions, improving privacy protections, and other actions designed to safeguard against financial and (possibly) political catastrophe.  As such, must of what we've learned may be offered to trusted persons.  Keep you eyes out for updated information on this front on the blog.  If you have immediate interest in learning about some of these offerings, send an email.

The first new edition of The Dredd Market Report is being compiled for posting this evening, along with a schedule for new postings and offerings.  In addition, starting on November 1, we'll be offering a newsletter with more detailed information to those that a contact us directly to be added to the list.

The fall season looks to offer some very, very interesting market moves.  All eyes on the Fed and QE2.  The market is set up for maximum disappointment unless the Fed exceeds an announcement of $500B.  More on this development to come.

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