With a total of 195 billion in auctions this week, the dollar has caught a bid in the last few days. Why? The free fall in the dollar has had small bounces along the way. This usually happens just before and during large treasury auctions. The logical thinking behind this is that in order to get rid of the US paper, the government cannot have a dollar that is collapsing. When the dollar moves lower quickly, higher interest amounts must be paid to buyers of the US debt to entice them to buy it. So in theory, if the dollar was truly collapsing, there may be no buyers or buyers that would only buy if they were paid 10%, 20% or higher interest rates. Now granted, my example is unrealistic in the near term but you all get the picture I am sure. So please note, for yourselves how the dollar seems to get a mysterious pop going into these large auctions. Could it be some manipulation to try and get more buyers at lower rates for our massive ever expanding debt? I think so. As the dollar firms, follow it into the last day of auctions and see if the dollar starts to drop again. Watch this closely, controlling the dollar directly controls the markets.
Having said that, the dollar of course gained today just before the auctions begin. The markets were mixed to lower with the DOW and S&P losing about 0.4%. Oil was crushed as I had issued a sell signal last Thursday/Friday based on trend line analysis techniques. In addition, technology was extremely strong with the Nasdaq posting a small gain on the day. Volume was very light as it looks like the markets may be on hold until we get the FOMC policy statement on Wednesday at 2:15pm ET.
