Too much talk about reverse correlation between dollar and everything else. Yes, we had such correlation since March. It doesn't mean such correlation would last forever.
During the great bull market of 1982-2000 dollar was going up, commodities down. Gold fell in 2001 to $256 from $850 peak in 1980. Oil traded as low as $10.50 in 1998. During bull market of 1960 commodities prices went up.
However, current correlation does present some useful information. This is information about markets. And it's very simple: this market is driven by traders. They are trying to find some order, some kind of dependency which can be traded, and run it as much as possible. Never mind fundamentals.
Right now market is in transition. It's still looking for direction. It's laughing at all attempts to find rational explanations. I was surprised to hear from Jim Cramer today that transports telling us that bull market is alive. Maybe. Maybe not. Nothing is certain right now.
I'm bullish long term. Almost certain that stocks, at least those I holding right now, are going to be much higher 18 months from now. But I'm not sure of short-term perspectives. So far, market was trading on technicals until March, then it was trading on sentiment. It ignored fundamentals. Now technicals don't tell anything (nice triangle formed up on S&P 500 graph, no?), sentiment is mostly bullish, but not outrageously so. Fundamentals still suck.
My hope is that fundamentals will start improving in the first quarter of 2009 and stock market will follow. Maybe we'll see the improvement even sooner. Let's say, US GDP shows second quarter of growth in the row, should be a great news! My problem with it: most earnings reports for the last quarter weren't that good. Earnings growth without revenue growth.
That's my hope. Let's see what will really happen.