The Faber Model And Inflation Pressures

Several weeks ago I presented research that improved the efficiency of the Faber market timing model for the S&P500 by some 50%. By efficiency I meant that the new and improved model made more money with less time in the market and with less draw down. The research can be found in this article, "Inflationary Pressures Are A Legitimate Concern".

The gist of the research was that stocks tended to under perform during times when the trends in gold, commodities, and yields on the 10 year Treasury bond were strong. The Faber model is a simple moving average model, yet we can improve the model's efficiency (for the S&P500) by moving to cash when (real or perceived) inflation pressures are strong as measured by a composite indicator that assesses the trends in gold, commodities, and yields on the 10 year Treasury bond.

So at the end of last month, the Faber model gave a buy signal for the S&P500, which is a monthly close over the simple 10 month moving average. Based upon the research in this article and other factors, I elected not to take this buy signal. As to my "call" on the markets, things were looking good as prices were some 5% below the original buy signal from the Faber model, but during the week of July 17, the S&P500 reversed higher, and by the end of the month, we are now some 12% off those lows. Not surprisingly, during the week of July 10, the trends in gold, commodities, and yields on the 10 year Treasury had come off appreciably opening the way for higher equity prices.

So here comes the end of the month, the buy signal from the Faber model is in the black by about 5.5%, which means the S&P500 is up 5.5% for the month of July. Inflation pressures have come off considerably, and this can be seen in our indicator that measures the trends in commodities, yields on the 10 year Treasury bond, and gold. See figure 1 a monthly graph of the S&P500. So according to our revised (more efficient) Faber model, this is now a new buy signal as inflation pressures are low and prices are above the simple 10 month moving average.

Figure 1. S&P500/ monthly

So how do I interpret this signal? The research and premise of the research is sound - stocks do not perform well during high (real or perceived) inflationary pressures. The corollary to this is that with low inflation pressures the environment for a bullish (i.e., sustainable) run is more sound.

So how do I balance a mostly bearish bent with this bullish back drop from the revised Faber model? In other words, how do I avoid a situation like 2002 where there was a vicious head fake as the fundamentals became divorced from the technicals? The best answer I can give you is to wait for a more risk adjusted entry point.

Let me show you the MFE graph from the original Faber model, which utilizes the simple 10 month moving average solely. See figure 2. MFE stands for maximum favorable excursion. You put on a trade, and hopefully, it runs up, and then the trade is closed out for a loss or a win. So looking at the caret in the blue box in figure 2, we see that it ran up 21% above its entry point (x-axis) before being closed out for a 15% winner (y- axis). We know this trade was a winner because it is a green caret. What we see from this graph is that the current 5.5% profit from this trade does not guarantee that this trade is going to be a winner. In fact, there are at least 4 trades (inside the oval) that ran up at least 10% before reversing and giving back their gains. In other words, the strength over the past month does not indicate we are out of the woods.

Figure 2. MFE Graph/ Faber Model

Now let's look at the MAE graph from the new, upcoming signal - this is the Faber model plus low inflation buy signal. MAE stands for maximum adverse excursion,and it assesses each trade from the strategy and determines how much a trade had to lose before being closed out for a winner or loser. For example, look at the caret with the blue box around it. This one trade lost 6.4% percent (x-axis) before being closed out for a 20% winner (y-axis). We know this was a winning trade because it is a green caret. What we see from the MAE graph is that about 50% of the trades had an MAE greater than 3%, and this is to the right of the blue vertical line. It should also be noted that all the losing trades from this strategy had an MAE greater than 3%. An MAE greater than 6.5% (or to the right of the red line) always (2 occurrences) resulted in a losing trade.

Figure 3. MAE Graph/ Faber Model Plus Low Inflation

So once again: how do I interpret the signal when there is low inflation as measured by our composite indicator and prices close above the simple 10 month moving average?

1) As the trading characteristics of the original Faber model show, a 5.5% run up above the signal entry in the S&P500 does not always translate into higher prices over time.

2) In the modified model, which is triggering a buy signal at the end of this month, I have a 50% chance of getting a pullback of at least 3%. Unfortunately, there is no "free lunch" here. As the MAE graph shows, all the losing trades from the modified strategy had an MAE greater than 3%. So while waiting for a pullback to lower my risk may seem prudent, there is an increasing risk that the trade will be a bust anyway.

3) A stop loss should be set 6.5% below this Friday's closing (end of the month) price on the S&P500. In the modified model, only 2 trades out of 40 had MAE's greater than 6.5% and both were losers. A stop loss set at this level hopefully will be out of the "noise" of the market.

Is 2009 Like 2002?

I have often thought that the 2009 rally resembles the rally off the September 11, 2001 lows that lasted into March, 2002. Even though the causes of the "crisis" are different, there are many noteworthy similarities.

In both cases, the bear market had been going on for greater than a year, and like then, investors are now hopeful that the worst is behind us. In the after math of 9/11, there was a lot of hope that America will bounce back. Hey, "we always do" is the phrase. "America is great. America is strong." (And I don't doubt our resolve as citizens in this country, but feel good rah rah is not going to get it done when we have real problems to face.) But by March, 2002, economic reality set in leading to one vicious head fake that led to new lows and a more solid base to launch a new bull market.

Is 2009 setting up like 2002? Will economic reality set in? Is the worst really behind us?

The short answer is that the jury is still out on this rally. It has been strong. It looks good as prices breakout to new 9 month highs, but the bulls remain hopeful that the all knowing, all seeing stock market has a crystal ball that can see those things that us normal folks can't see: better economic times ahead. Most would agree that the economic landscape is frought with landmines.

Investors are clearly under the assumption that the worst is behind us. But as we found out in 2002 for stock prices, the worst was not behind us. Back then, the economy had bottomed as the recession had officially ended in November, 2001, but the market's bottom was much lower. Currently, signs are pointing to a bottom in the economy as in "things" are not getting worse, and yet with unemployment still rising, we could even argue this point. But I know we can agree that "not getting worse" doesn't mean that they are going to get better either, and this is were investors remain hopeful.

Like 2002, 2009 finds the Federal Reserve extremely accommodative. Liquidity remains abundant. Like 2002, the leading economic indicators in 2009 are improving. Like 2002, the S&P500 is above its 200 day moving average. Like 2002, we find prices on the S&P500 having closed above its simple 10 month moving average. Yes, the similarities are there.

The S&P500 rally in 2001 and 2002 went from the low on September 21 to a high on March 19. It lasted 123 trading days. From low to high the percentage gain was 21%. The currently rally has gone on 98 trading days since March 6, 2009. Through Friday, the percentage gain on the S&P500 has been 43%! Rather than say that such strength is just a sign of new bull market, I could argue it is just mean reversion of a deeply oversold market.

Technically, the current rally is hitting new highs while the 2002 rally ended in a triple top. See figure 1 for a daily graph comparing 2002 (orange line) to 2009 (blue line). This is a clear difference - new highs (2009) v. failure to make new highs (2002).

Figure 1. 2002 (orange) v. 2009 (blue) / daily

For now the current rally has come a long way. A lot of hope is built in. Some may call this "the wall of worry" as the markets continue to climb in the face of bad news. Technically, I look at a market that has been driven higher by short covering -i.e., the "this time is different" scenario - and where stocks are for renting not owning.

I still believe that this time period will prove to be a bear market rally, but in my mind, it doesn't matter what we call it anyway. Simply put this is just not the time or place to jump in with abandon as it is difficult to see how we get there (secular bull market) from here.

Does this mean we re-test the March 9, 2009 lows? I think we are a long way from seeing that happen. Stocks would have to move lower, and of course, if they move lower, investor sentiment will become bearish. This will be a buy signal. If this buy signal fails to produce a sustainable tradeable rally, then there is risk that the markets could retest their March, 2009 lows. As I stated, this is a long ways off.

Is 2009 shaping up like 2002? Possibly. As stocks are hitting new highs, investors certainly have put a lot of hope in a recovery that has yet to materialize.

Investor Sentiment: Investors Not Buying It

Investor sentiment remains little changed after a two week "melt up".

The "Dumb Money" indicator is shown in figure 1. The "Dumb Money" indicator looks for extremes in the data from 4 different groups of investors who historically have been wrong on the market: 1) Investor Intelligence; 2) Market Vane; 3) American Association of Individual Investors; and 4) the put call ratio.

Figure 1. "Dumb Money" Indicator/ weekly

As investors are not buying into the rally, one might conclude that the rally will march onward and upward until they do, and then it will rollover. That seems likely. However, it is hard to imagine that prices will continue making gains at the pace seen over the past two weeks. I still stand by the sell signal and expected spike in prices that I wrote about two weeks ago. The recent "breakout" in prices will eventually be seen as a better time to sell rather then a new launching pad for a bull market. That's how I see it for now.

The "Smart Money" indicator is shown in figure 2. The "smart money" indicator is a composite of the following data: 1) public to specialist short ratio; 2) specialist short to total short ratio; 3) SP100 option traders. The "smart money" is neutral.

Figure 2. "Smart Money" Indicator

Key Price Levels: July 23, 2009

It has been almost a month since we last looked at the key price levels. For the most part, key support levels held several weeks ago. This week, we can describe the price action as a "melt up". Nonetheless, resistance levels are looming overhead.

Please review the methodology and the significance of the key price levels by clicking on this link.

A weekly chart of the S&P Depository Receipts (symbol: SPY) is shown in figure 1. The 86.78 level and the 40 week moving average provided support, and the intraday low several weeks ago was at 87. The close over the negative divergence bar (price bar marked in pink) has led to the "this time is different" scenario. Prices are melting up as traders cover short positions. $100 is the target. This is a 1000 on the S&P500. This is a nice round number and it happens to coincide with the down sloping trend line formed by two key pivot low points; this trend line broke down back in October, 2008. In addition, this would represent a 38% retracement of the down move from the October, 2008 top to the March, 2009 lows.

Figure 1. SPY/ weekly

A weekly chart of the Diamond Trusts (symbol: DIA) is shown in figure 2. This was the mother of all fake outs. The DIA broke below support levels at 82.64, and this also happened to be a close below the negative divergence bar. Prices were expected to be lower, but a quick reversal and a close back above the negative divergence bar has prices at the $90 level. Dow 9000! It has been that quick. The next minor level up is at 93.28, which is the high of the positive divergence bar (marked in red). The gap at 100 or Dow 10,000 needs to be filled; this seems improbable, but let's not put it past the market to show us all what we can't obviously see - the economy has recovered!! (sic)

Figure 2. DIA/ weekly

Figure 3 is a weekly chart of the Power Shares QQQ Trust (symbol: QQQQ). The weekly close over the negative divergence bar is leading to a melt up and I believe that $40 would the price target. This would be the down sloping trend line draw from the October, 2008 top. In addition, this would represent a 50% retracement of the down move from the October, 2008 top to the March, 2009 lows.

Figure 3. QQQQ/ weekly

Figure 4 is a weekly chart of the i-Shares Russell 2000 Index (symbol: IWM). The IWM closed below the prior negative divergence bar, but it found support 47.58 and the 40 week moving average, which was a key level. Then prices reversed and the close over the negative divergence bar has catapulted prices higher. IWM has the potential to get to 60, which would fill the gap from the October, 2008 breakdown. This would be the biggest percentage gainer of the 4 ETF proxies sited in this article, and I guess this is expected as investors will undoubtedly seek the most volatile instruments yielding the highest return.

Figure 4. IWM/ weekly

It Is Almost Comical

In an effort to continually punish the Rydex market timers, the market continues to defy the consensus at least over the short term here.

I recently showed how the Rydex timers, who have been leveraged and bearish, were slaughtered of late. After a one day reprieve (on Friday), these market timers are once again bearish and leveraged on the markets on Monday and Tuesday. Not surprisingly the market has showed persistence here. See figure 1 which is a daily chart of the SP500 (symbol: $INX) with the amount of assets in the Rydex bullish and leveraged funds (green line) v. the amount of assets in the Rydex bearish and leveraged funds (red line).

Figure 1. Rydex Bullish and Leverage v. Bearish and Leveraged Assets

While I agree with that posture -as in it is difficult to get too aggressive after last week - it is becoming comical to see these market timers continually on the wrong side of the market. It is one thing to be wrong and sitting on the side lines and not making money and a completely different dynamic to be in the market and wrong in your conviction and losing money.

We will continue to follow this saga!

Follow Up To Japanese ETF's

I have been watching the i-Shares MSCI Japan Index Fund (symbol: EWJ) for about 6 months now. On a pure technical basis this ETF, which tracks the MSCI Japan Index, has a high likelihood to move higher over the next 12 months.

Here's the setup in this monthly chart of the EWJ. See figure 1. The "next big thing" indicator is in the lower panel, and this indicator looks for those technical characteristics typically seen at market bottoms prior to changes in the secular trend. The indicator is now in the zone where we would expect a secular trend change to occur. With a close over the simple 10 month moving average, this is the technical confirmation that we expect a trend change from down to up to occur.

Figure 1. EWJ/ monthly

For example, let's design two studies utilizing the EWJ ETF. In study #1, we will buy when prices close above the simple 10 month moving average and sell when prices close below the 10 month moving average. Entries and exits are based upon monthly closes only.

Since 1991, such a strategy has yielded 6.23 EWJ points; buy and hold has netted a negative 3.75 points. There were 16 trades of which 37.5% were profitable; this is typical of a pure trend following strategy as there are a lot of little losers and several big winners. Your time in the market was 46%. The RINA Index, which is a measure of points gained, draw down and time in the market, was a lowish 24. Think of the RINA Index as measuring trade efficiency.

In study #2, we will only take those entries in the EWJ when the "next big thing" indicator is in the zone that suggests a trend change is likely and when prices close above the simple 10 month moving average. In this instance, the "next big thing" indicator is acting as a filter to screen out market noise. Our exit strategy remains the same.

Since 1995, study #2 yielded 8.57 EWJ points; buy and hold netted a negative 5.75 points. We have reduced our total trades to 6 and increased our percentage of winners to 67%. Time in the market was reduced to 33% as well. Our RINA Index, our measure of trade efficiency, increased almost 4 fold to 96. Of note the average trade from this strategy lasts about 11 months.

Similar results are also achieved with a tactical strategy that trades the Japan Smaller Capitalization Fund (symbol: JOF). See figure 2, a monthly chart of the JOF with the "next big thing" indicator in the lower panel.

Figure 2. JOF/ monthly

Let's apply strategy #1, our pure moving average strategy as noted above, to the JOF. Since 1991, such a strategy has yielded 1 JOF point; buy and hold was a negative 5 points. There were 16 trades of which 25% were profitable, and your time in the market was 36%. The RINA Index was a very poor 2.6.

In strategy #2, we are a little more tactical as we added the "next big thing" filter. The results are good and much improved over the pure moving average strategy (i.e., strategy #1). Since 1995, such a strategy produced 7 JOF points; buy and hold yielded negative 2 points. There were 7 trades (v. 16 from strategy #1) of which only 29% were profitable. Time in the market was reduced to 24%. The RINA Index improved over 20 fold, and this measure of trade efficiency is 62. Once again, using the "next big thing" indicator as a filter improves the efficiency of a simple moving average trading system.

So let's summarize this technical set up. In the EWJ and JOF, the "next big thing" indicator suggests a high likelihood of a secular trend change, and combining this filter with a popular moving average model has improved the efficiency of this pure trend following method alone.

Holy Short Covering, Batman!

If I were to watch one piece of data from the Rydex asset data, it would be the leveraged bulls v. leveraged bears. Not only can we discern what way this small group of market timers is leaning (i.e., bull v. bear bet), but we can also get a glimpse of how much conviction (i.e., use of leverage) they have in their belief. Typically, we want to bet against these market timers.

Figure 1 is a daily chart of the S&P500 with the Rydex leveraged bulls (green line) versus the Rydex leveraged bears (red line). For 4 out of 5 days last week during the market's romp, the amount of assets in the bearish and leveraged funds was greater than the amount of assets in the bullish and leveraged funds. These market timers were betting against the market and got crushed. Nothing like good old fashion short covering.

Recent excesses by the bearish and leveraged are noted with the dotted vertical lines.

Figure 1. Rydex Leveraged Bull v. Bear/ daily

My time frame is a bit longer term, and these short term swings are under my radar. On the other hand, with such strong returns over such a short time period, I guess I should start paying more attention to these things. So let's note that the assets in the leveraged and bullish funds now exceeds those in the leveraged and bearish. Recent excesses by the bullish and leveraged Rydex timers led to short term tops as noted by the gray rectangles over the price bars.

Semiconductor Sector: Folks Now Just Catching On

On March 20, 2009, I wrote an articled entitled, "Semiconductor Sector: Potential For A Secular Run". In this article I stated:

"The technical evidence suggests that "the bottom" is in for semiconductors. The potential for a secular trend change is there. If the general market gains traction - a big "if" here as I view the current market rally as a counter trend rally in an ongoing bear market - then it would not surprise me to see the semiconductor sector providing leadership."

Since March 20, 2009, the Semiconductor Sector is up about 33%.

Fast forward 4 months and this week we see this article from Bespoke Investment Group entitled "Semiconductors Up 36.13% Year To Date". I am sorry but this is what I love (sic) about investment advisory services like Bespoke. They are very good about calling yesterday's horse race today. Don't tell me what happened yesterday, last week or even over the last 4 months. Tell me HOW what happened yesterday, last week, or even last month is going to affect prices going forward. Period!!

What is the point of market analysis if it isn't germane to price movements?

Figure 1 is a monthly chart of the Semiconductor Index (symbol: $SOX) going back to its inception in 1995. This big picture view really shows a head and shoulders top with a violation of the neck line (down red arrows) that occurred in October, 2008. The current lift from the March, 2009 lows then would be the throwback or bounce back towards the neck line that is typically seen with this price pattern. (For an overview of the head and shoulders pattern, click on this link.) The neck line is now resistance.

Figure 1 $SOX/ monthly

Figure 2 is another monthly chart of the $SOX, but here we are focusing on the past several years. I have left our resistance or neck line on the chart, and this is in black. Two down sloping blue trend lines are formed by prior high and low pivot points, and this should provide significant resistance as well. However you slice it, this confluence of resistance lines will not be broken so easily.

Figure 2 $SOX/ monthly

Let me finish, by stating that semiconductors are still technically poised to provide market leadership for the next bull market if and when that comes. And I still think this notion of a new bull market v. bear market rally remains on the table. Regardless, when it comes to the Semiconductor Sector I would have to say, "Not so fast." Others are just discovering the "next big thing" so what a good time for this sector to disappoint. Overhead resistance remains formidable.

Investor Sentiment: Exhaustion Move?

Last week I wrote:

"In the short term, there is always hope for the bulls as prices on the S&P500 remain above the down sloping 40 week moving average and above the key support level at 876. In addition, personal research shows that prices will likely move higher in the week or two after the "Dumb Money" indicator has moved from extremely bullish zone (i.e., bear signal) to neutral as it did this past week. Into this this mini - lift would be the optimal time to sell (if you haven't done so already)."

Little did I know that our "mini-lift" would result in a full blown route of the bears. The S&P500 made an intraday low at 875.32 on Monday and proceeded to move straight up for the rest of the week for a gain of 7.4%. This is the best weekly showing since the March 9 bottom. So is this the start of a new leg up or an exhaustion move?

My bet is that this will play out as an exhaustion move. This is all part of the topping process.

Prior to last week's mega-lift, the bears (or those looking for the market to rollover) were all puffed up and the bulls were demoralized. After all, the S&P500 was down 4 weeks in a row ("oh, my god") and off its recent high by some 7%. After this week, the bulls are strutting their stuff, and the bears are thinking about what is it going to take for this market to rollover. As I see it, the S&P500 remains range bound, and we are at the upper end of that price range. The markets are doing what they always do - just confounding the bears and the bulls.

But for all its effort, the S&P500 is right back where it started some 11 weeks ago when the "Dumb Money" indicator first made an extreme bullish (i.e., bear signal) reading. The "Dumb Money" indicator is shown in figure 1. The "Dumb Money" indicator looks for extremes in the data from 4 different groups of investors who historically have been wrong on the market: 1) Investor Intelligence; 2) Market Vane; 3) American Association of Individual Investors; and 4) the put call ratio.

Figure 1. "Dumb Money" Indicator/ weekly

What about last week's big gains? What does that mean? Within the context of investor sentiment, last week's strong price move is more likely an exhaustion move than the start of another leg up. Typically, such strong up moves occur with the "Dumb Money" indicator much more bearish on equities.

The only thing I cannot rule out is a melt up or what I like to call the "this time is different" scenario. I previously mentioned that I have defined the "this time is different" scenario as a weekly close over the high of a negative divergence bar. Negative divergence bars between price and momentum oscillators that measure price indicate slowing upside momentum. In anticipation of a market top, traders will take positions as these negative divergence bars begin to appear. My research shows that a weekly close over the highs of a negative divergence can lead to an accelerated price move, and it is my belief that this is due to short covering as traders cover losing positions. The bulls say, "Yeah, I told you so. This time is different." But usually it rarely is.

On the QQQQ or ETF proxy for the NASDAQ 100, the "this time is different" scenario is clearly in effect. The weekly close over the 36.50 level puts this scenario on the table. The same is true for the SPY or ETF proxy for the S&P500; the SPY closed at 94.13 and the trigger for the "this time is different" scenario was a weekly close greater than 94.02.

The "Smart Money" indicator is shown in figure 2. The "smart money" indicator is a composite of the following data: 1) public to specialist short ratio; 2) specialist short to total short ratio; 3) SP100 option traders. The "smart money" is neutral.

Figure 2. "Smart Money" Indicator/ weekly

Start Of A Moon Shot?

I was reading another blog, and there was a comment to the effect that it appears like the NASDAQ is a moonshot. This reminded me to check my price charts that contain the key price levels. Figure 1 is one such chart, and it is a weekly chart of the Power Shares QQQ Trust (symbol: QQQQ). With the weekly close over the highs of the negative divergence bar (marked in pink, with blue up arrows), there is a high likelihood of a moonshot as this is the definition of the "this time is different" scenario.

Figure 1. QQQQ/ weekly

I previously mentioned that the "this time is different" scenario occurs on a weekly close over the high of a negative divergence bar. Negative divergence bars between price and momentum oscillators that measure price indicate slowing upside momentum. In anticipation of a market top, traders will take positions as these negative divergence bars begin to appear. My research shows that a weekly close over the highs of a negative divergence can lead to an accelerated price move - hence, our moonshot - and it is my belief that this is due to short covering as traders cover losing positions.

For shorts and those on the sidelines, this continues to be a tough market.

Fundamental Driver For Dollar's Downfall?

David A. Rosenberg, chief economist and strategist for Gluskin Sheff and Associates, writes a very nice (and free) almost daily commentary about the markets and economy. I am sure many of you read Mr. Rosenberg, but if you don't, you can sign up here.

Today, Mr. Rosenberg has an interesting piece "Is The U.S. Dollar Next?" It is the second anniversary of the credit crisis, and after all the stimulus plans and bailouts and zero percent Fed Funds rate, the economy is still on life support. Or to put it another way: is this all we get for all the money thrown at this crisis? Today, GDP is negative; two years ago it was 5%. Unemployment is climbing towards 10% from a 5% level two years ago. The deficit is ballooning. Most importantly, despite all the money committed to rescuing the economy, there is still little clarity going forward.

Rosenberg conjectures:

The government has tried just about everything. Or has it? What if we were to tell you that the one policy tool that is unchanged since the summer of 2007 is … the U.S. dollar? It is exactly the same level now, on any trade-weighted measure, as it was back then. The greenback is struggling at the 50-day moving average, and this could well be the next policy shoe to drop.

Rosenberg believes that it will be the rising unemployment rate at the time of the mid-term elections in the face of an improving economy that could be the catalyst that leads to a devaluation in the Dollar.

His first reason is self interest:

As we said above, the U.S. government has practically exhausted all of its policy options … except for one; the U.S. dollar. It is the only policy tool that has not budged one iota since the crisis erupted two years ago. As we mull this over, we recall all too well this great book that a client referred us to a few years back and it was Robert Rubin’s autobiography – “In An Uncertain World”. What we learned (as did the client and whoever else has read it) was obvious — the United States will always do what is in its best interest. Full stop.

His second reason is President Obama's tendency to use the FDR depression playbook:

In addition to knowing it is going to be an election year in 2010, we also know that we have a President who has, step by step, been taking feathers out of FDR’s cap in dealing with this modern day depression. The one item that has yet to be utilized is U.S. dollar depreciation, and if memory serves us correctly, FDR snuffed out the worst part of the Great Depression when he unilaterally devalued the dollar to gold in 1933 by 40% (and fixing the price of gold at $35/oz).

Rosenberg summarizes:

But we are sure that as the unemployment rate makes new highs and increasingly poses a political hurdle in a mid-term election year, that it would make perfect sense, for a country that always operates in its best interest — even if it may not be in everyone’s best interest — to sanction a U.S. dollar devaluation as a means to stimulate the domestic economy.

Remember, this is a premise. We are just conjecturing.

As I recently pointed out in the article, "Dollar Index: At Risk To Unravel", Rosenberg also highlights which assets and sectors will be the "beneficiaries" if the Dollar embarks on a downward path. It should be noted that Rosenberg's time frame is "sometime in 2010", and I think there is a high likelihood of a downdraft in the Dollar if prices make a weekly close below 79.46 on the Dollar Index (symbol: $DXY). Regardless, our focus on which assets will benefit is similar.

Certainly this is only a consensus of two, but I am happy to be in the company of such a well respected analyst!