The flushing of the dollar started yesterday.

That’s not a surprise. The dollar has been swirling round the toilet bowl for several months now. It was only a matter of time before someone jiggled the handle.

But that our own Treasury Secretary Steven Mnuchin did the jiggling is a little surprising.

Treasury Secretaries aren’t supposed to trash-talk the dollar. They’re supposed to wink and cross their fingers while proclaiming support for a strong dollar policy. Mr. Mnuchin’s statement that a weak dollar could be a good thing caught the currency markets off guard yesterday and sent the buck reeling. The dollar index closed down more than 1% yesterday. It’s down 6% since November.

As I mentioned on Tuesday, this sort of flushing action usually occurs closer to the end of an intermediate-term downtrend than towards the beginning. So, if you’ve been profiting off the falling dollar, then you might want to start booking some gains. The buck has just about reached our downside target.

Take a look at this longer-term chart of the US Dollar Index…

You can see how the dollar’s decline accelerated when it broke below its first red support line earlier this month. Now the index is approaching its second support level near 88. That’s a logical target and a reasonable spot at which to start looking for a bounce.

If support doesn’t hold at 88, then the index is headed lower towards 85. But I don’t see that happening.

You see, the “short dollar” trade is getting quite popular. Yesterday’s decline caused a lot of currency traders to pile on with dollar shorts.

And the market rarely rewards popularity.

I’ve been bearish on the buck for several weeks. The chart action is playing out almost exactly as we expected it to.

Now though, as the index approaches our downside target, it’s time to start taking profits on dollar shorts.

The buck still has a little more room to fall. But it’s a lot easier exiting trades when everyone else is rushing to get in than waiting until the momentum turns and then trying to get out with the crowd.

Best regards and good trading,

Jeff Clark

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Reader Mailbag

Today, some notes from Delta Report subscribers…

Loved your call to buy weekly SPY puts based on your analysis to get in on the action. Thank you.

– John W.

 

Really enjoy your concise presentations which makes it easy to quickly make a decision and move on to the next opportunity.

– Buddy C.

 

Crazy subscribers! For veteran traders… I hope you pass this along to those subscribers that kill your trade recs by either putting in market orders or are just plain FOMOs!

You! Yes you! The one that sits in the first spot to the left of the dealer at the blackjack table. You! That, when the dealer MUST hit, you hit instead and ruin everyone else’s hand. You know… if you just show a little patience and discipline and stick with Jeff’s reccomendation you just make yourself a little bit more money. If you couldn’t note the inflection of Jeff’s email about running up the options price… then clueless you are (a little Yoda for you). This has happened a few times over the last 6 months.

Help Jeff keep subscribers… we love him and his service… but if this keeps happening it just may drive others away. Please listen to his buy-up-to reccomendations… use your limit orders. At the time of this writing last week’s trade now is up a net 20 cents from his call, give or take.

– Blair S.

As always, feel free to send in your trading stories, questions, and suggestions right here.