Summary: Goldman Sachs is no longer recommending a long trade on the dollar. The dollar was previously regarded as a conviction trade, first over speculation over Fed rate hikes and then over Trump exuberance with the expectation of tax cuts, infrastructure spending and other moves that would continue to inflate the dollar bubble.  The dollar was the most crowded trade out there.  I believe, however that as we get close enough to the next recession, that we are going to get another big Keynesian stimulus of increased government spending and tax cuts, which will send the budget deficit through the roof and that will send the dollar through the floor.

* We've been having quite a bit of volatility in the U.S. stock market, with back-to-back triple-digit moves in opposite directions

* Yesterday, the Dow was up well over 100 points, closer to 200

* But today the Dow Jones was down better than 100 points

* Between the 2 days it was still positive, but we'll see what happens tomorrow

* We did get some worse than expected new after the bell on IBM; I'm seeing the stock down close to 5% in after hours trading

* That could set the tone for some weakness tomorrow

* Goldman Sachs helped set a weak tone today; they came out with earnings earlier in the day and their stock was down close to 5%

* What was more interesting about Goldman Sachs was not their missed earnings,

* But the fact that they are now throwing in the towel on their long-term recommendations to buy the dollar

* Of course, the dollar has been strong over the past few years

* Although really since March of last year the dollar has gone sideways

* It did make a marginal new high during the Trump mania, after the election

* But only against a few currencies, not against all currencies

* The dollar index today was down sharply; it closed at about 99.50

* The strongest currency today was the pound sterling; it was actually up about 3 full cents; a 2.25% move

* The dollar was also down today against the euro, against the yen

* It was up against some of the commodity currencies, which had been stronger during the year

* It looks to me that the dollar has topped out, and it looks that way to Goldman Sachs

* They are saying, "This is no longer our top recommendation, like a conviction trade"

* Why? because everybody assumed that the dollar was going to go up

* Because the Fed is hiking rates; we're getting all this economic stimulus, tax cuts, we're going to get infrastructure stimulus

* Whatever the reason, everybody was certain the dollar was going to go up

* Remember, I said it was the most crowded trade out there


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