The Greenback and Materials

The UUP which is the etf that tracks the dollar, showed a clear break at $26 last week and I do believe it is going lower still. How could it not when we print and distribute obscene baskets of loot on a daily basis to broken companies that have zero shot of organic growth for decades to come? In any event, a further decline in the dollar should be good for commodities and materials, at least according to the playbook. However, this time could be different as the China economic growth explosion looks like it could become more of an implosion this time around. I'm very bearish on China. The commodity surge that started back in August 2007 was ignited to a significant degree by China and its growth prospects. That dynamic has now been muted if not removed by this deep global recession that we are now in. The text book says weak dollar, buy materials and commodities. I just ask who will be buying the actual commodity?

The Dollar And Oil

I'm not in the crazy energy bear camp like most right now because I constantly worry about fire works and the Nigerians, but absent that, oil looks lower. The DUG call yesterday paid off and should continue to do so. Way too many variables on this one though. I'll trade it as I see it though and I do like the pump under $4. The dollar rally has failed before too.

Watch The Greenback This Week

A few weeks ago I mentioned that I thought the G-7 meetings would help strengthen the dollar. There is a lot of gas and rhetoric shooting around and it may be very short lived, but futures traders may cover some of their greenback short bets just in case it gains traction. If the dollar rallies it could hurt the commodity space a bit, mainly gold oil and copper.PCU is still one I would like to get long so I will be watching closely to see how it pans out.