Before Mourning Death of Dollar, Check Current Sentiment

Oct 13, 2009: 10:41 AM CST

I wanted to share an excerpt from an article from Elliott Wave International and analyst Nico Issac who wrote, “Before You Morn the Death of the Dollar, Check this Chart.

The following article is based on analysis from Robert Prechter’s Elliott Wave Theorist. For more insights from Robert Prechter, download the 75-page eBook Independent Investor eBook. It’s a compilation of some of the New York Times bestselling author’s writings that challenge conventional financial market assumptions. Visit Elliott Wave International to download the eBook, free.

Mr. Issac notes the following two factors in contributing to bearish sentiment on the US Dollar:

  • An alleged (and later denied) secret meeting among leaders of certain Arab States, China, Russia, and France which aimed for the immediate discontinuation of oil trading in U.S. dollars.
  • And, an open statement from one senior United Nations official that proposed the dollar be replaced as the world’s reserve currency.

He also notes a similar ‘chorus of negativity’ that occurred in early 2008.

Excerpted from the article:

“The U.S. dollar stood at an all-time record low against the euro after plunging more than 40% in value. And, according to the usual experts, the greenback was “dead”-set to meet its maker. On this, these news items from early 2008 say plenty:

  • “The dollar is a terribly flawed currency and its days are numbered.” (Wall Street Journal quote)
  • “It’s basically the end of a 60-year period of continuing credit expansion based on the dollar as the world’s reserve currency.” (George Soros at the World Economic Forum)
  • “Greenback is losing Global Appeal… the ‘Almighty’ Dollar is Gone.” (Associated Press)

YET — from its March 2008 bottom, the U.S. dollar came back to life with a vengeance, soaring in a one-year long winning streak to multi-year highs. In the most current Elliott Wave Theorist (published September 15, 2009), Bob Prechter presents the following close-up of the Dollar Index since that trend-turning bottom.

Nico concludes the article by saying:

“It’s crucial to understand that markets don’t necessarily respond to sentiment extremes immediately. But, such extremes do indicate exhaustion of the trend — which is usually the opposite of what the mainstream expects.”

Sentiment analysis is one of the many ways to observe trends and financial markets… it’s something I often overlook until I read an article like this which reminds me to keep my perspective wider than the charts themselves.  “Reading sentiment” can open a different dimension of market analysis.

Disclosure: I am a proud affiliate member of Elliott Wave International and am able to share these types of articles with permission.

Corey Rosenbloom, CMT

5 Comments

5 Responses to “Before Mourning Death of Dollar, Check Current Sentiment”

  1. Brian_Barker Says:

    A recent CNN television broadcast gave the impression that Esperanto aims to be a single global language. The comparison was with a global reserve currency, instead of the US dollar.

    See http://www.youtube.com/watch?v=ZpC8mPk4QBM

    May I put the record straight? Esperanto intends to be an auxiliary language, or a second language for all.

    Please see http://www.lernu.net for confirmation.

  2. Dan de Man Says:

    Bring on the higher dollar so we can make money the fast way shorting commodities :o)

  3. Corey Rosenbloom, CMT Says:

    Haha

    Somehow shorting seems to be more fun than buying because prices often fall faster than they rise.

  4. Remush Says:

    Brtian,
    at sec: 41 the journalist says : a potential second language…. Esperanto.
    —-
    If there are good reasons not to have one common currency, why don't the different states in the US print their own currency, and abandon the dollar? Their economies are more different than in the Eurozone !

  5. Remush Says:

    Brtian,
    at sec: 41 the journalist says : a potential second language…. Esperanto.
    —-
    If there are good reasons not to have one common currency, why don't the different states in the US print their own currency, and abandon the dollar? Their economies are more different than in the Eurozone !