People often ask me what my opinion about the stock market is and when I tell them my theory they often express their disagreement. My theory has always been that over the next 3-5 years the market will hover in a range between 1100 and 700 and I would be a seller of stocks right now. Most people are near term thinkers with the "what have you done for me lately" mentality. They have long forgotten that the market is still well off its highs and at the same level as it was in 2003-2004 and are focused on the tremendous rally from the March lows. I have been suspect all along of this rally and here's another data point to consider. The following Chart is the performance of the S&P vs the US dollar. It is almost perfectly inversely correlated.
Now you wonder why Bernanke et all aren't pushing a strong dollar policy and are happy enough to see our dollar tank. The question I pose to you readers is how much further can the dollar trade lower before it becomes a hugely crowded trade and we get a violent short squeeze? What do you think will happen to US equities?
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