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Dennis Gartman: The Trend is For Much Stronger Dollar

On Thursday, chatter on Wall Street had everything to do with the pullback in the dollar and whether the recent strength was starting to abate.

Considering energy and materials had been the top two sectors over the past two quarters when stocks rallied, the dollar could make or break this market.

That’s because a stronger dollar makes commodities more expensive to holders of other currencies, which in turn drags down demand. If commodities and commodity related stocks in the energy and materials sectors sell-off due to dollar strength, the entire S&P could go with it.

And that leads to the multi-billion dollar question – what’s next for the dollar?

For insights we turned to one of the most widely followed and celebrated commodities traders we know – Dennis Gartman of the Gartman Letter.

And Gartman tells us he expects the dollar to move higher – a lot higher.

He explains that many pro investors are still short US dollars. “Let’s understand that the world is still egregiously and preposterously short the buck,” he says.

And that’s a problem because recent developments overseas have been dollar bullish.

As an example Gartman cites, “recent comments made by Trichet that caught investors off guard.” As you likely know Jean Claude Trichet recently telegraphed that another ECB rate hike was unlikely at the June meeting.

Gartman also points to the fiscal woes of Portugal, Italy, Ireland, Greece and Spain. “This is going to drag out for a long time. Every one of the PIIGS has a problem.”

And he says until these nations break away from the EU, there will be an overhang of discouragement. ”The trend is toward a much weaker euro and a much stronger dollar over time,” he says.

What do you think? We want to know!

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Trader disclosure: On May 12, 2011, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s "Fast Money" were owned by the "Fast Money" traders; Finerman's Firm owns (M); Finerman's Firm owns (TGT); Finerman's Firm owns (WMT); Finerman owns (ESV); Finerman owns (JPM); Finerman owns (JPM); Adami owns (AGU); Adami owns (C); Adami owns (GS); Adami owns (MSFT); Adami owns (NUE); Adami owns (BTU); Pete Najarian owns (PFE); Pete Najarian owns (MRK); Pete Najarian owns (AAPL); Pete Najarian owns (TCK); Pete Najarian owns (AKAM); Pete Najarian owns (C); Pete Najarian owns (HPQ); Pete Najarian owns (TEVA); Pete Najarian owns (MS); Pete Najarian owns (RSX); Pete Najarian owns (GE); Pete Najarian owns (MSFT); Pete Najarian owns (YHOO); Pete Najarian owns (VLO); Pete Najarian owns (TER); Pete Najarian is long (RIMM) calls; Pete Najarian is long (AVL) calls; Pete Najarian is long (NTAP) calls; Pete Najarian is long (XLF) calls; Pete Najarian is long (PMCS) calls; Pete Najarian is long (CVS) calls; Pete Najarian is long (XL) calls; Pete Najarian is long (BSX) calls; Pete Najarian is long (HBC) calls; Pete Najarian is long (EWZ) calls; Pete Najarian is long (XLI) calls; Pete Najarian is long (FCX) calls; Terranova owns (VRTS); Terranova owns (AAPL); Terranova owns (JPM); Terranova owns (V); Terranova owns (BX); Terranova owns (UPL); Terranova owns (BAX); Terranova owns (PFE); Terranova owns (PEP); Terranova owns (MCD); Terranova owns (TM); Terranova owns (DIS); Terranova owns (BJ); Terranova owns (APA); Terranova owns (OXY); Terranova owns (XOM)

For Joe Terranova
Terranova is Chief Market Strategist of Virtus Investment Partners, LTD
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Scott Nations
**No Disclosurses


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