The Dollar is set for a large decline, here’s why

In our “2006 Investment Roadmap” (see below) we tried to
repeatedly emphasize the importance of the Euro 1.235 level that gave way since
last week’s column. The GBP, Swiss Franc, and CAD have also broken out versus
the dollar and the dollar has broken down at below the 88 level of a weekly head
and shoulders top pattern that looks setup to ultimately reverse the entire
dollar bull market of 2005. As indicated in our Roadmap, this is a landmark
event that changes the environment of the financial markets significantly.
Investors who can hedge against dollar declines should do so. Even those who
don’t have hedging accounts should consider margined hedges in FXE, the ETF for
the Euro.

Just a few trading days after the critical breakout in the Euro and breakdown in
the dollar, Bernanke looks to be giving his nod to a dollar decline by
suggesting in the strongest language yet, that the Fed is likely to be close to
the end of its tightening cycle. Investors should look for more wild moves in
commodities, a new bear leg in dollar, more market volatility, and fasten your

Last week the metals blew-off but the lows held in all but silver and with the
dollar breakdown, their strength is impressive. New highs by base metals in
particular will show remarkable resilience. The markets feel more and more like
the wild seventies than I could have imagined.

While this is a wild ride party for those on board the right trends, investors
need to keep their feet on the ground. No one should NOT be troubled by the
persistent decline in bonds — it is musical chairs time in the markets and
investors should keep margin levels low and expect for some chairs to eventually
go missing so that risk should be lower than normal here.

I continue to suspect strongly that the period directly ahead is one where it
may be ABSOLUTELY CRITICAL for investors to have a solid grasp and understanding
of the Big Picture Macro background of global markets, the top secular themes,
and the huge vulnerabilities of this environment. A potential MAJOR SHOCK to the
markets is brewing and those unaware could easily be sideswiped. That is why I
wrote the “2006 Investment Roadmap” which is my best effort at thoroughly
explaining the global macro picture and its precarious state as well as what to
watch closely to monitor how massive risks are developing.

Our US selection methods, our Top RS/EPS New Highs list published
on, had readings of 137, 123, 66, 68 and 80 with 18 breakouts
of 4+ week ranges, no valid trades meeting criteria, and no close call. This
week, our bottom RS/EPS New Lows recorded readings of 11, 7, 11, 14 and 9 with 6
breakdowns of 4+ week ranges, no valid trades and no close calls. The “model”
portfolio of trades meeting criteria is now long
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(use this weeks low to 50
day ma as ops area if not stopped out already),
GG |
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(use support around 30 level
as trailing stop and re-enter if partial profits taken),
TS |
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(this week’s lows
look important to hold),
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, and
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(here too this week’s lows look
critical)— with new highs this week in WIRE, GG and TS. Continue to tighten up
trailing stops whenever possible on stocks with open profits and strive to move
stops to break-even or better as quickly as possible in new entrants.

In our “2006 Investment Roadmap” we
tried to identify how major markets could change and what the impact of those
changes could be along with noting what levels to watch in which markets to see
those changes developing.

We have now had TWO major changes — one in bonds, and one in the dollar that
has developed since then. The impact of these changes is too long a subject to
cover fully here, but we believe it is critical to investors to understand and
monitor more closely than ever. A perfect storm may be brewing for certain asset

Mark Boucher
has been ranked #1 by Nelson’s World’s Best Money Managers for
his 5-year compounded annual rate of return of 26.6%.

For those not familiar with our long/short strategies, we suggest you review my
The Hedge Fund Edge
, my course “The
Science of Trading
,” my video seminar, where I discuss many new techniques,
and my latest educational product, the

interactive training module
. Basically, we have rigorous criteria for
potential long stocks that we call “up-fuel,” as well as rigorous criteria for
potential short stocks that we call “down-fuel.”

The “2006 Investment Roadmap” is also my best effort at explaining the
top secular themes that every trader should be focused on in their portfolios. A
special offer of this exclusive report is available to
clients at
. So far the groups highlighted in the 2006
Investment Roadmap are exploding in value and appear set to continue to do so.