Last week ended with the dollar falling to a 20-month low and global markets turning down on concerns of the U.S. budget and trade deficits and a possible move by China to diversify its dollar holdings. While a weaker dollar might ordinarily help bring the U.S. trade deficit back into balance, with a Chinese currency fixed relative to the dollar, the only thing we really will get is more inflation and higher interest rates.

As loyal readers are well aware, this dynamic has been a core concern of mine for months but the markets continue to shrug this concern off – until the small hiccup last week. I for one have been planning on a December downturn and see the current rally as nothing more than the usual seasonal bacchanal – robust though it has been. Enjoy it all while it lasts but at this point I’d rather be in cash or short than long on the broad U.S. indices.

This Week’s Market Movers

This will be a big week on the data front. For starters, the housing sector will see both existing and new home sales fly on Tuesday and Wednesday, respectively. The Fed’s Beige Book comes out, too, on Weds along with a revision to the 3rd quarter GDP. Starting the new month on Friday, we’ll also get the ISM index and auto sales. All this adds up to a volatile week. No one indicator stands out as a market mover but coupled with the aforementioned pressure on the dollar, this week would feature a distribution day or two.

Navarro’s Portfolio Shorts and Longs

Cash is king for the risk averse. If you want to try to pick a top, short the Spiders (SPY | Quote | Chart | News | PowerRating).

Peter Navarro is a business professor at the University of California and the author of the best-selling investment book “If It’s Raining in Brazil, Buy Starbucks” and the business shelf bestseller The Well-Timed Strategy.” His latest book is “The Coming China Wars.”