Until they finally let Volcker speak on May 20th, Ben Bernanke is literally the only person that the US Government can put on the You Tubes right now with the end result of the US Dollar arresting it's decline.
The more we see the likes of Timmy Geithner, Hank Paulson, Kenny Lewis, etc... (basically anyone who is conflicted and compromised by their long standing membership in de Club) the lower the US Dollar will go.
Today, Bernanke is back on the Tube, issuing the world some long awaited American credibility. As a result, the US Dollar stops going down, and stocks stop going up.
I know, its perverse... and I know, every time I write this I get the customary "that doesn't sound right" feedback... But know this - the inverse correlation between the US Dollar and US stocks is as relevant in 2009 as any inverse correlation in global macro.
Can Bernanke Break the Buck? Sure - he needs to buy a mother load of bonds though in order to accomplish that from here because the Chinese don't look to be as excited about "investing alongside" the USA as they used to be... would you be?
China selling Treasuries (or not buying them) and Bernanke buying them back are not 1:1 offsetting factors either. This is very complicated and will continue to be as long as the Chinese continue with this US Dollar Replacement Rhetoric. Rhetoric and reality are often two very different things...
Economic recovery, and the associated raising of interest rates here in the USA can also provide the Buck a bid. For now, on the American side of the ledger at least, I am not comfortable saying that this morning's ISM Non-Manufacturing recovery (see chart below) is going to be sustained through the summer months.
Where does this chart and the US stock market go from here? I am, data dependent. As the facts roll onto the tape, fully loaded from moves in the US Dollar to the yield curve, I will adjust my positioning. For now, the best position is to have sold yesterday's rally, and wait...
Keith R. McCullough
Chief Executive Officer
