Friday, October 8, 2010


The stock market is now entering the timing band for a move down into a daily cycle low. Today is the 29th day of the cycle and we usually get a final cycle bottom by day 40. Of course we need to allow some time for the decline to unfold so I think we can expect a top any day now.

The move down in stocks should coincide with a bounce in the dollar index as the dollar is already moving into the latter part of the timing band for its daily cycle low.

Since gold has been tracking the dollar almost tit for tat I expect the rally in the dollar to also pressure gold down into it's daily cycle low which is now due.

I have complete confidence the stock market will indeed move down into a cycle low. I'm also confident the dollar will rally during this process. Gold is questionable. There remains the possibility that it could be in a runaway move and miners have broken out to new all-time highs so there is a chance that gold could ignore the dollar rally.

This is why one shouldn't lose their core position. However late comers may want to wait and see if the dollar bounce does push gold down into a cycle low before adding to their core or adding leverage.

All this being said any dollar rally should be brief and the next leg down into the yearly cycle low will cause massive damage to the dollar as the burgeoning dollar crisis starts to intensify.

More in last nights report for subscribers...


  1. Hi Toby, forgive me for not understanding this. Are you saying that you are expecting S&P 500 to fall right now and in the next 10 days of falling mark the bottom by the day 40? Also,you say that you are expecting dollar rally to be very brief. Don't you expect for the dollar to rally in the same 10 days while equities are falling ? I looked at S&P500 chart and counted 40 days from the July low to Sept. low, but i also counted February to May rise which lasted for 50 days. What makes you think that this rise that started in September couldn't continue for another 20 days? Sorry for bothering you. Cheers

  2. There is always the possibility for a long cycle but the long term average is about 35-40. So sometime soon we should put in a short term top in stocks and then begin a move down into the cycle low that should bottom by day 40.

    And yes I expect the dollar to rally during this process.

  3. So, what you're saying is that we have only about 10 days left to reach low? I don't know , it doesn't look toppy to me at all. S&P keeps making new highs.But yes, there is a considerable resistance at 1175, where two channels meet

  4. The chart of the S&P is meaningless. When the dollar rallies it will drag the market down. The dollar did form a swing low today.

  5. I don't know, i have seen dollar index make two or three swing lows in the last month, where there was one day with higher low followed by key reversal day followed by price falling through like a brick

  6. Except none of those swings occurred in the timing band for a daily cycle low.

  7. Ok, thats true. Still think it will test support at 76. By the way, dollar chart looks eerily similar to that of end of 2008. There is even exact same falling wedge pattern on RSI.And if you look at the dollar chart from 2008, there is a big ascending triangle forming. Do you think price will test 200 MA in this bounce?

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  9. Well I don't waste too much time with chart patterns but I think 80 will be the highest we can expect the dollar to rally and that may be asking a lot.

  10. You call that a rally? I kid, i kid. Thanks Toby and cheers

  11. i read that you are predicting long term fall of us dollar

    there is negative corelation beetwen stock market and usd SO

    long term drop in dollar would mean that stock market would only rise and rise, new bull market ?

    i dont think its possible, soon maybe even before end of year markets should start a second leg of downside, in this case is "impossible" for usd dollar to drop

  12. Just printing money will not make the stock market rise forever. It will however make inflation rise. Eventually that destroys the economy just like it did in the summer of 08 when the Fed's printing presses spiked the price of oil to $147.

    So you are exactly right in the futile attempt to reflate asset prices the Fed is ultimately going to doom us to another even more devastating economic collapse which will of course drag the stock market down into the third leg of this long term bear market that began in March of 2000.

  13. Toby, I am a subscriber to your newsletter and I am learning a lot from your insightful emails.
    When you say that :
    "the Fed is ultimately going to doom us to another even more devastating economic collapse which will of course drag the stock market down into the third leg of this long term bear market that began in March of 2000."
    when do you expect that process to start. Will it be around March - June 2011 and what you expect the dollar to do by then.

  14. It will start when the currency crisis that has now begun spikes inflation high enough to collapse the economy again.

    Who knows when that will happen although I expect that the dollar rally out of the 3 year cycle low next year will coincide with the economy sinking back into the next recession. The stock market could very well top before that though it's hard to say.

  15. In your 21st Aug. weekend report you mentioned that you expect the current cycle to run one more intermediate cycle into the March -June time frame.
    Does it mean that you are expecting the dollar to dip again during that time frame and if so, at what level.
    Thanks for explaining.

  16. Yes the current intermediate dollar cycle has at least one more daily cycle before it bottoms and probably two. A normal duration intermediate cycle would bottom on week 20 which is late December.


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