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U.S. Dollar: Kiss Goodbye or Reversal at Hand?
Remember how bearish people were on oil ten years ago? Today, it's the U.S. dollar.
It may seem extreme, but the October 12 headline on DrudgeReport.com (one of the world's most popular news websites) "Kiss the Dollar Goodbye," complete with a picture of a smooching President Obama, is a fair reflection of the sentiment toward the buck.
Based on a recent poll, bullishness towards the U.S. dollar is still low (17%) and has been as low as 3% on previous occasions. This reminds me of the sentiment towards crude oil in December 1998, when it traded just above $10/barrel. At that time prices had already fallen by half, and the almost universal opinion was that oil would go below $10/barrel. Price had to drop only 36 cents to get there -- but it never happened.
The headline above plainly states what many business articles are saying. There are also rumors that the dollar will be replaced as the pricing currency -- another example of extreme bearish sentiment. We've seen similar rumors in the past when negative sentiment towards the dollar would reach an extreme: in late 2004, for example.
All this bearishness continues to fit the Elliott wave pattern we see in the U.S. Dollar Index charts: Potentially completed five waves down since March 2009.
All that lacks so far is the actual turn, which would be signaled with a dollar rally in five waves.
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