How the Strong Dollar and Earnings are Impacting the Market

Chris Versace

Chris Versace is a financial columnist and equity analyst with more than 20 years of experience in the investment industry.
[dollar bills]

There are many components that go into being a smart investor…

From reading whatever you can get your hands on when it comes to industries and companies… to not being afraid to do the number-crunching valuation homework… or knowing when to deviate from the hype and the herd, just to name a few.

It’s a full-time job — and that’s just for obvious and less-than-obvious things that go into picking a stock — let alone managing a portfolio of something between one and two dozen stocks.

If you don’t have a staff or several sources of solid information coming to you every week, odds are you’ll miss some things.

As this week is proving, it sure seems that Wall Street has missed at least one thing — the impact of the strong dollar.

Make no mistake, there has been much talk about currencies — from the weakening of the euro, which fell apart last week following the European Central Bank’s (ECB) stimulus package, to the stronger U.S. dollar.

Ahead of that meeting, I recommended to subscribers of my PowerOptions Trader service two trades that aimed to deliver on the expected ECB stimulus announcement.

And those two trades — going long the PowerShares DB US Dollar Bullish ETF (UUP) March $25 calls and the Guggenheim CurrencyShares Euro Trust (FXE) March $113 puts — did just that, and then some…

To the tune of gains of 88.46% and 90.68%, respectively, in the span of only a few days.

Back to what the market is only now realizing: not only are the economies outside the United States weak to sluggish, per last week’s January flash PMI data, but the strong dollar has made goods and services from U.S. companies even more expensive on a relative basis. That’s not good for quarterly performance for either the December quarter or the one we’re currently in.

Exclusive  Victory Belongs to the Most Tenacious

How’s Wall Street waking up to this? By hearing companies from Procter & Gamble (PG) and Dupont (DD) to Caterpillar (CAT) and Bristol Myers (BMY) use the strong dollar as one of the excuses, if not the reason, for missing Wall Street expectations. Odds are pretty high that we will see more companies plead the strong dollar in the coming days.

As I warned subscribers, this week is simply frenetic with earnings reports. We will hear from more than 25% and more than one-third of the S&P 500 companies and Dow Jones Industrial companies, respectively, as they report earnings.

At the Thematic Growth Portfolio that I manage for Fabian Wealth Strategies and in my PowerTrend Profits investment newsletter, we’ve moved to reduce our exposure to companies that have significant exposure to international markets when it comes to revenue and profit.

In the short to medium term, we’re focused on companies with significant domestic exposure, like American Railcar (ARII), American Water Works (AWK) and others. You’re probably wondering what I’m doing with the capital that’s been returned from the sale of those positions I mentioned above.

Heading into the week, there was no doubt the valuation on the S&P 500, which was above its 5-, 10- and 15-year averages, was stretched.

Now we have more warnings of slow to no growth and the impact of the dollar to deal with. My plan is to sit on the returned cash and ride out at least the balance of the week and more likely than not keep sitting on it into next week, building my stock shopping list in the process.

Exclusive  Six Inflation-Protection Investments to Buy as Russia Extends War

Putting Option Trades Where My Mouth Is

Above, I mentioned a great options pair trade in the form of going long the PowerShares DB US Dollar Bullish ETF (UUP) March $25 calls and the Guggenheim CurrencyShares Euro Trust (FXE) March $113 puts.

From time to time, I recommend call option pair trades to PowerOptions Trader subscribers in order to deliver exceptional returns. When examining pair trades, I tend to look for clear-cut winners and losers from an upcoming event. That’s right, I actually practice what I shared with you recently — calendar and catalyst investing.

And as you can see (with quick-strike gains of 88% and 90%), it really can pay off if you identify the right trades.

You can learn more about my options strategies and track record — and how YOU can score these kinds of big gains from the comfort of your own home — here in this brief presentation.

In case you missed it, I encourage you to read my e-letter column from last week about my predictions for the ECB meeting, as well as my new options trading video. I also invite you to comment in the space provided below.

Upcoming Appearances

O Join me for the World MoneyShow in Orlando, Florida, Feb. 4-7 at the Gaylord Palm Resort & Convention Center. To register for free admission to the investment conference, click here or call 1-800-970-4355 and mention you are my subscriber. Use priority code 038046.

O I also invite you to attend the only event that gives retail traders hands-on access to the very same tools, technology and ideas as the best and brightest traders in the world — The Traders Expo New York!

Exclusive  The Real Cause of Income Inequality Will Surprise You

More than 30 hours of firsthand mentoring from me, Chris Versace, and 70 other elite traders is just a slice of what’s happening February 28 – March 2, 2015. Here’s more of what’s in store:

  • Experience the Most Interactive Traders Expo Yet
    Unprecedented access to top traders in all markets, plus LIVE trading, product demos and more!
  • Get Exclusive Content Directly from the Major Exchanges
    Ultra-reliable trading information straight from the NYSE, CME and CBOE.
  • See the Latest Breakthroughs in Trade Platforms and Technology
    Try it all out for yourself, from new software and indicators, to trade systems and mobile apps.
  • And Get 2 Special eBooks — a $158 Value — Yours FREE
    Receive “The Top 4 Market Timing Tools for Profitable Trading” instantly when you register, and “5 Things Traders Need to Know” when you attend the Expo!

Register FREE at!

share on:

Like This Article?
Now Get Mark's FREE Special Report:
3 Dividend Plays with Sky-High Returns

This newly-released report by a top-20 living economist details three investments that are your best bets for income and appreciation for the rest of the year and beyond.

Get Access to the Report, 100% FREE

share on:


Dr. Mark Skousen

Named one of the "Top 20 Living Economists," Dr. Skousen is a professional economist, investment expert, university professor, and author of more than 25 books.

Product Details

  • Forecasts & Strategies
  • Home Run Trader
  • Fast Money Alert
  • Five Star Trader
  • TNT Trader

Bryan Perry

A former Wall Street financial advisor with three decades' experience, Bryan Perry focuses his efforts on high-yield income investing and quick-hitting options plays.

Product Details

  • Cash Machine
  • Premium Income PRO (exclusively for subscribers of Cash Machine)
  • Quick Income Trader
  • Breakout Options Alert
  • Hi-Tech Trader

Jim Woods

Jim Woods has over 20 years of experience in the markets from working as a stockbroker,
financial journalist, and money manager. As well as a book author and regular contributor to
numerous investment websites, Jim is the editor of:

Product Details

  • Successful Investing
  • High Velocity Options
  • Intelligence Report
  • Bullseye Stock Trader
  • Eagle Eye Opener

Bob Carlson

Bob Carlson provides independent, objective research covering all the financial issues of retirement and retirement planning. In addition, Bob serves as Chairman of the Board of Trustees of the Fairfax County (VA) Employees’ Retirement System, which has over $2.8 billion in assets.

Product Details

  • Retirement Watch
  • Retirement Watch Spotlight Series
  • Lifetime Retirement Protection Program

Jon Johnson

Jon Johnson's philosophy in investing and trading is to take what the market gives you regardless if that is to the upside or downside. For the past 21 years, Jon has helped thousands of clients gain success in the financial markets through his newsletters and education services:

Product Details

  • Investment House Daily
  • Stock of the Week
  • Technical Traders Alert
  • Rapid Profits Stock Trader

Used by financial advisors and individual investors all over the world, is the premier provider and one-stop shop for dividend information and research.

Product Details

Popular tools include our proprietary Dividend Calendar, Dividend Calculator, Dividend Score Card, and many more.

  • Dividend Investor