A dramatic change in sentiment (EWI)

Loving the Dollar: From 97% Bears to 98% Bulls
Investors have gone "dollar crazy" -- but we've seen such extremes before.

By Robert Jay Wed, 26 May 2010 11:30:00 ET	Email |  Print  |   RSS |  My Updates	BOOKMARK AND SHARE IT!

The U.S. Dollar Index has been near its 52 week high in recent days. What a contrast from just six months ago, when the greenback was despised and spat upon. Beyond merely detested, traders even built a figurative pine box for the buck.

During the second half of last year, the very few who believed in an upcoming dollar rally had to exercise great patience. It paid off when, finally, the Dollar Index reached a low of $74.17 in November of last year.

 

For several weeks before the low, you could count the percentage of bulls on one hand -- with fingers left over. Among them were the bullish dollar analysts within the walls of Elliott Wave International's headquarters. Reflecting back to last year during a recent interview, EWI's president Bob Prechter said, "I thought [being bullish the dollar last year] was one of the best contrary opportunities I'd ever seen."

 

Why were our analysts bullish while most of the rest of the world hated the buck? We "counted the waves," and those waves told a story -- the story of an impending trend change from down to up. We published this chart in September 2009:

 

 

What a change in sentiment we are seeing today. Dollar bulls climbed as high as 98% recently! From 3% dollar bulls at last year's lows to 98% bulls at this year's highs. "Right now, investors love the U.S. Dollar Index, because it's not the euro," commented our May 17 Short Term Update.

 

Wouldn't it be ironic if this extreme sentiment extreme again warned of an impending trend reversal -- a warning the majority will ignore just like they did six months ago?

 

You can see our clearly labeled U.S. Dollar Index charts in The Short Term Update right now. Today, we are using the same principles that we used to alert subscribers to the dollar rally last year, when most disagreed.