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Stock Drop Will Give Short-Term Boost to Dollar

By Sean Hyman   |   Monday, 31 Jan 2011 08:44 AM

I recently rolled out my weekly video to my subscribers of the Money Matrix Insider newsletter. In that video, I explained how I believe that there would be a stock-market correction coming in the near-term. I believe that Friday may have been the starting point of that correction.

I don’t think it is starting a stock-market downtrend. I just think that the market is overdue for a sizable pullback based off of the stock market being so stretched from its major moving averages and due to Elliott Wave counts that shows that a sizable correction is upon us.

So as stocks correct here in the U.S., here’s what it will do to the currency market. One of the main benefactors of a near-term decline in stocks will be the greenback. In fact, as stocks started correcting on Friday, the dollar started the temporary rally that I’ve been calling for. It broke out of a “falling wedge” pattern on its four-hour chart and headed north.

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By watching Elliott Wave counts on the long-term weekly chart and a triangular consolidation pattern on the U.S. Dollar Index weekly chart, it showed me that the dollar would rally early on in 2011, but then the latter part of the year would prove to be very bad for the buck. In fact, at that point, the dollar will likely head into fresh all-time lows. If it doesn’t make it by the end of the year, it will in the first six months of 2012.

But in the meantime, the buck is going to catch a break. That also means that the “anti-dollar,” which is a nickname for the euro, will get pulled down as the dollar temporarily benefits.

So that means that there will be more trouble in the near-term for the euro no matter what Germany or France says in support of the euro.

So look for more euro declines coming in the near-term.

But before it’s all said and done, the euro will end the year higher than it is now. It’s just taking it on the chin now. And that could continue for the next couple of months or so, depending upon how swift the drip happens.

So in a nutshell, the next month or two won't be favorable to the stock market or the euro. But it will be favorable in the short-term to the buck. But in the end, we all know the dollar’s fate. That’s why you should use these temporary dollar rallies to take part of your assets and get them out of the dollar and get them into stronger currencies with more sound fundamentals.

Come follow me in the Money Matrix Insider newsletter and we’ll do it together.

About the Author: Sean Hyman
Sean Hyman is a member of the Moneynews Financial Brain Trust. Click Here to read more of his articles. He is also the editor of Money Matrix Insider. Discover more by Clicking Here Now.

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I recently rolled out my weekly video to my subscribers of the Money Matrix Insider newsletter. In that video, I explained how I believe that there would be a stock-market correction coming in the near-term. I believe that Friday may have been the starting point of that...
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