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Bolling: Nothing Lucky About Rally

Last Friday's rally, despite negative news, was long overdue and it was not a matter of 8/8/08.

Eight seems to be the magic number.

In Chinese numerology, recurring numbers represent luck, and 8/8/08 was thought to be the luckiest day. Three eights were the perfect day to launch the Olympics. However, that day the luck was flowing here in our equity markets rather than in Beijing where the numerologists reside.

Think about this for a minute. If someone told you that there was a brand new conflict between Russia, a big oil producer with 200 million residents, and its small (population 4.5 million) border neighbor Georgia, and if you heard that Russian tanks were rolling and casualties were mounting, what would you guess the reaction would be in the oil market? Up $5? $10?

I know I would have guessed a big move up in oil and an opposite reaction in equities.

Instead, we got oil dropping $5 per barrel and a 300-point move up in the Dow. 8/8/8 lucky? Maybe.

I think luck had nothing to do with all the good things happening on Wall Street last week. I have been waiting for weeks for something to happen and it did on Friday. The theme of this column has, on many occasions, centered around the expectations that the U.S. dollar was primed for a rally.

In fact, on

June 4

and

July 9

, a dollar rally was the primary focus of this column. On many other occasions, the dollar was the supporting actor in the calls.

That strong dollar rally appeared in a big way last Friday. The dollar index was up a whopping 1,200 points. That was the biggest move in the index and against the euro in four years.

The dollar rally was well-anticipated and the resulting stock market rally was expected. I mentioned that the dollar rally would push oil lower and it did ... even with a world-leading oil producer in a conflict with a neighbor.

I have held a long dollar position for several weeks waiting for this move. I lightened the position on Friday, but I am still long the dollar. The strength in the dollar has many good side effects besides lower oil prices.

Confidence in the U.S. financial system cannot be undermined if we plan to get out of this credit crisis any time soon. The first step toward rebuilding confidence in our banking system is for the dollar to rebound.

That sets the stage for investors around the world to see that we are OK. Our financial house is getting in order.

That confidence is then reflected in our financial institutions' stock prices. When the financials perform, the broader market responds. That was the case Friday. The dollar was rock solid in early morning European trading and shrugged off headline after headline that could have sent it south.

But they didn't and it ran and ran.

Citigroup

(C) - Get Citigroup Inc. Report

was up 5%, while

AIG

(AIG) - Get American International Group, Inc. Report

rose nearly 5%.

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Wells Fargo

(WFC) - Get Wells Fargo & Company Report

gained 4%, and

JPMorgan Chase

(JPM) - Get JPMorgan Chase & Co. (JPM) Report

rose 3%.

This week I expect the dollar to move back and fill. This provides a great opportunity to add to my long dollar. After massive moves like this latest dollar rally, a correction can be healthy for the bull case. I did sell a large portion of my position, but I am looking to buy it back in pieces over the next week. I plan on buying if the dollar retreats. If not, I booked a profit on what I sold and will let the remaining long position run.

The easiest way to establish a long dollar position is through the

PowerShares DB U.S. Dollar Index Bullish ETF

(UUP) - Get Invesco DB US Dollar Index Bullish Fund Report

. I have written about this in recent weeks and still think it is a fantastic long-dollar vehicle.

Derivatively, I like some of the financials as well. With relatively solid balance sheets, JPMorgan and

Goldman Sachs

(GS) - Get Goldman Sachs Group, Inc. (GS) Report

should benefit from this dollar-strength.

I remain long Goldman. I have long classified GS as my favorite bank-commercial, investment, or other.

The newly established trading range for UUP should keep it above $22.65. Below that, a well placed stop-loss exits the balance of the position. And with Goldman, $165 is my stop-loss. I like the long dollar and Goldman play, but I always use stop-loss triggers for the unexpected downside.

If 8 8 8 is lucky in China, 8 /11/8 should be too! Good trading ... luck has little to do with it.

Trade with your head, not over it.

At time of publication, Bolling was long dollar futures, Goldman Sachs and Citigroup, although holdings can change at any time.

Eric Bolling is a host on the new Fox Business Network. Bolling was one of the developers and original panelists (nicknamed "The Admiral") on CNBC's "Fast Money."

Bolling is an active trader specializing in commodities, resource trades and ETFs.

Bolling is a member of several exchanges including The New York Mercantile Exchange (NMX), The Intercontinental Exchange (ICE) and The Commodity Exchange of New York.

After spending 5 years on the Board of Directors at the NYMEX, he became a strategic adviser to that Board of Directors where he assisted in bringing the company (NMX) public. He has been included in Trader Monthly Top 100 in 2005 and 2006. Bolling was the recipient of the Maybach Man of the Year Award in 2007 for his contribution of philanthropy and willingness to de-mystify investing to Main Street.

Bolling graduated from Rollins College in Winter Park, Florida and was awarded a fellowship to Duke University. Bolling was an accomplished baseball player. He was drafted by the Pittsburgh Pirates where he played before his career was cut short due to injuries. He honors his baseball past by sporting the NYMEX trader badge, R.B.I.