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DOLLAR PLUNGE GIVES BIG BOOST TO COMMODITIES

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The Fed announced that it will purchase $40 billion a month in mortgage backed securities which adds to its holdings of long-term securities and ushers in another round of quantitative easing (QE3). The markets have all reacted in predictable fashion. The dollar and bond prices are falling while commodities and stocks are rising. Chart 1 shows the PowerShares Dollar Index Bullish Fund (UUP) threatening to fall below its spring lows. As is normally the case, the falling dollar is giving a strong boost to commodities. Chart 2 shows the DB Commodities Tracking Index Fund (DBC) climbing to the highest level in six months. It has also broken a down trendline extending back to May 2011. Not surprisingly, precious metals are leading the commodity charge. Economically-sensitive industrial metals are also rallying.

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John Murphy
About the author: is the Chief Technical Analyst at StockCharts.com, a renowned author in the investment field and a former technical analyst for CNBC, and is considered the father of inter-market technical analysis. With over 40 years of market experience, he is the author of numerous popular works including “Technical Analysis of the Financial Markets” and “Trading with Intermarket Analysis”. Before joining StockCharts, John was the technical analyst for CNBC-TV for seven years on the popular show Tech Talk, and has authored three best-selling books on the subject: Technical Analysis of the Financial Markets, Trading with Intermarket Analysis and The Visual Investor. Learn More
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