Bullish on the US Dollar

The big news in the world continues to be the disaster in Japan.  The stock market opened the day down big, but it later recovered about half its losses.  The S&P 500 lost 1.12% on the day to close at 1281.87.  From a contrarian investors point of view, the bad news in Japan is supportive of the market.  News such as this causes amateur investors to sell stocks and to sell short, and the market will always do what is necessary to cause the maximum number of people to lose money.  This could explain the intraday recovery that we experienced today.  I expect the markets to continue to be choppy and to frustrate everyone, both bulls and bears alike.  The dominant trend is down, but the market will not move in a straight line.  Lower highs will be followed by lower lows.  Amateurs will continue to "buy the dip" and will be punished accordingly.  Momentum traders and chartists will pile onto the short side near all important lows, and they will suffer accordingly as well.    Contrarian trading argues for a disciplined approach to carefully establishing positions and avoiding what the majority of market participants are doing at any one time.  An overcrowded trade can never be successful.  Currently, the crowd hates the US dollar and loves gold & silver.  A recent Market Vane survey showed that only 7% of the people were bullish on the US dollar.  Look for the US dollar to outperform both gold and silver over the next one and a half to two years.