Contrary to what most people think, the most powerful man in the world is not the President of the United States but the chairman of the Federal Reserve. Whether right or wrong he can and will move world economies.
He can't control Europe directly but he can make it clear that if they don't get their shit together the U.S. will take what little business they do have left. How? By recreating the Reagan imperial circle substituting the high interest rates with higher returns on investment and a safer place to invest. That will draw money to the U.S. and away from other developed economies.
The same goes for China and whoever the hell else. In America people want to get rich, that's what we do. Our first instinct is to make money. A signal that policy makers here are getting the house in order and are likely to avoid truly high, growth killing taxes associated with super high debt is a signal to invest here.
Shit like this Hostess situation is good for business also as it points to capital still being able to discipline labor here. You wanna go on strike when we're not even making any money asshole? Well, we'll shut it all down and you can picket an empty building!
Housing can provide the GDP growth needed for the next leg up in this market. if not in actual growth then in expected growth and if and when real growth from it shows up that will be the leg up after this one. In a crazy world where else would you put your money? There will be bumps along the way but as long as they come from outside the U.S. It's a positive for the U.S... This should be enough to force the other developed economies to get it together, or at least make greater attempts to if nothing else look like they're really trying to.
That's the fundamental case, now the technicals..
A technically important thing happened on the $DX_f chart in recent months. The 50 day crossed below the 200 day moving average. Here's what that daily chart looks like:
This happened in mid October. The cross attracted price and the dollar index ran up to test the 200 day break down. Price has been back above the 200 day and it's been pure struggle the whole time. The test is over traders. How do we know? because instead of being support the 10 day once back above the 200 day is acting as resistance. Check it out:
The last three bars on this chart show that price attempted to shoot higher (the third bar from right to left is Friday 11-16-12) and failed. The very next day the ten day was broken by price and now it's just waiting to get killed. It's like a horse with a broken leg just waiting to get put out of it's miseries.
Full disclosure I'm short $DX_f from Friday so I want it to get put out of it's misery. But I've been stalking this trade since price got back above the 200 day so I smell blood.
This implies a risk-on trade in the near term and I'm trading that accordingly. My favorite stock play right now is $FNF. Do some homework and make some money there if you like but the banks in general look like buys here. The regulation scare has a bigger bark than it's bite I believe. But don't take my word for it, do your due diligence, it's the only way you'll be able to hold on when the bumps come. And the bumps will come!
Good luck traders and happy hunting!!