Dear CIGAs,

Today is an example of why so many people who attempt to make it as professional traders and investors fail and end up as just another statistic on the highway of market casualties.

The number one thing a good trader/investor must possess is the ability to control their emotions and use their heads in spite of all the clamor arising from the markets. It never ceases to amaze me how otherwise clear-thinking and rational folks can go completely bonkers and forget nearly every reason they were bullish or bearish on a market because that market happens to experience a correction in price and a retracement in either an ongoing rally or a declining leg down.

I have seen some strange things over the years in trading but the wild and hair-brained notion floating around today that somehow Fed interest rate cuts are going to result in a bull market in the dollar because it signifies that the Fed has taken action to ensure the prevention of an economic slowdown probably takes the prize for the most bizarre notion I have seen in a long, long time. If that was true, then the YEN should be the strongest currency on the planet right now since it is quite evident that the Japanese monetary officials are taking whatever action necessary to avoid a recession and therefore that is a reason to bid the yen to the stratosphere. Gimme a break already! Anyone who actually believes this idiocy is a candidate for some oceanfront property in Arizona.

You have a short squeeze in the Dollar and a bunch of long liquidation in some of the other majors – that is all. On top of that you have end of the month book squaring and even some beginnings of end of the year position reduction. Some guys made so much money shorting the dollar this year that they are buying back their incredibly profitable shorts and are going to take the rest of December trying hard to figure out how to spend it all! Hey – you have to buy them back sometime if you want to actually realize any gains! I would not be the least bit surprised, as a matter of fact I fully expect, if the same guys will be back very soon in the new year to pound the dollar back down again. They may not even be willing to wait that long if the dollar reaches a level that many consider attractive for shorting once again.

You’ll look back at this a bit down the road and wonder what all the fuss was about.

Dan