Dollar Rally?

It is like Tom Hanks said to a random lady waiting for a bus in the movie Forest Gump: "So I went to the White House... Again... and got a medal... Again". He looked totally bored about an event that for most people would have been a red letter day in their lives. We could say that about our markets. The equity markets went up... again... and the commodities went up... again.

However the Nifty is not like all other markets and decided to add some spice to our lives by having a sharp drop in the last couple of days. While nobody knows the real reasons, monsoon worries and the Swine flu epidemic sound plausible enough to pass muster. It is tough to take a call where the Nifty is headed given the real enough monsoon problem. I am currently short on the Nifty since the time it broke below 4580. If it trades above 4565 today for more than 5 minutes I will cut my short positions and go long.

Another interesting battle that is taking place in the world markets is between Dollar Bulls and Bears. Till recently any rally in equities and commodities was followed by a drop in the Dollar. This was supposedly due to the reversal of the "reduction in risk trades". After a long time there are signs that the US is stabilising and possibly coming out of recession. This is dollar positive and also positive for equities and commodities. So from now on we could have a situation where a rally in commodities and equities could also mean a rally in the Dollar. The last year and a half of negative correlation of the Dollar with other commodities and equities could be set to end. On the charts, Dollar looks like it has formed a strong positive divergence and could rally from here. The good thing is that it does not necessarily have to be negative for other asset classes.

I sound like one of those strategists that I... well love so much!!!. Will that mean a multi crore salary and an even bigger bonus?... Well only my bosses can answer that one!!!.