Thursday, February 17, 2011

DOLLAR ON THE EDGE OF THE ABYSS

The dollar is now poised on the edge of the abyss.

The current intermediate cycle has rolled over and is making lower lows and lower highs. The current daily cycle has formed a swing high and is in jeopardy of rolling over into a left translated cycle. If the dollar breaks below the November intermediate bottom of 75.63 it will be an incredibly bearish sign as not only will the current intermediate cycle have topped in only 4 weeks but the larger yearly cycle will also have topped in only 4 weeks.


If that happens there is little chance the dollar will be able to hold above the March 08 lows as the crash down into the three year cycle low begins in earnest.



This will not only drive the final leg up in gold's huge C-wave it will also drive a huge spike in inflation in all other commodities. Food riots world wide will intensify. The rest of the world will be in an uproar over the collapsing dollar. Spiking commodity prices will collapse discretionary spending just like it did in 08 and 09.

The phony economy driven by Ben's printing press will roll over when he's forced to turn off the presses to halt the dollar collapse. (Just like it started to do last summer when QE ended and the stock market started to collapse.)

The dollar's rally out of the three year cycle low should correspond with stocks beginning the next leg down in the secular bear market and the next brief deflationary period just like the bounce out of the 08 three year cycle low drove the second leg down in the secular bear market.

The rally out of a three year cycle low usually lasts about a year to a year and a half. The next 4 year cycle low in the stock market is due in 2012. I expect that year long rally out of the coming three year cycle bottom to drive stocks down into the next major 4 year cycle trough and drive the CRB into it's next major cycle bottom.


A lot is riding on the next 2/3 weeks. If the swing high in the dollar yesterday does signal the top of the dollar's daily cycle then the November low will almost surely be broken and the chain of events I laid out will be set in motion.

43 comments:

  1. missing from your analysis (but supportive of your conclusion) is the fact that in the near future people are going to see what a turd the Euro is, even worse than the dollar. Things are in a truly bogus state across the pond.

    thus the dollar (though trash itself) will rally and the markets will perform inversely.

    what a perverse world we live in.

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  2. JP Morgan is preparing a gold liquidation ( a massive sell ) to take down to 1200 dollars or less in the next 2 months .. If you ask the traders engaged in gold they will tell you that is not yet the moment because there has to be even 2 or 3 major pullbacks

    Silver need a pullback to 26-27 ..

    Be ready ..People is gonna loose money , big money ( banks will not allow the gold to become the world reserve .. And this means that at any price will create a "artifial" massive sell

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  3. Fernando. Your source please???????

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  4. That is some scary stuff. I knew the D wave in gold would likely scare investors, but the dollar. Yikes.

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  5. Perhaps Fernando could enhance his credibility if he could learn to write English a bit better.

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  6. If JP Morgan does do a massive gold liquidation (it is possible)
    many countries like China, India and Russia will be there to buy.

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  7. JPM announced recently that it is accepting gold as collateral equivalent to US Treasury bonds. So they then decide to destroy their collateral value?

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  8. I think they'll keep this slow trickle phony fascist banana republic rally going for a long, long time in order to try and make sure Obama gets elected again. If they can stretch it out that long, the bear comes back for real in 2013 and definitely by 2015. The stock market is in a form of conservatorship after 2008 with its main purpose being a psychological and political football. The wealth effect is now official US govt policy and the stock market is an asset of national security. There can be no selloff until the Bernank is somehow forced to pull the plug. Until then, buy gold and silver in protest. Wanna turn the money funny to create an illusion? Nope, I'm out and into some gold and silver eagles. This is the only thing that can preserve a free society, private gold and silver ownership.

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  9. If that was really possible the market would never go down.

    Stocks are just in a runaway move. Those typically stretch much further than most expect, but almost always end in some kind of crash type scenario.

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  10. Just look what this will do to the national debt.

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  11. Time is right to buy property in good locations. What is a better way to fight inflation. Gold is not a good investment. I'll take a mobile home park any day

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  12. Real estate is a burst bubble. Those never reflate. Real estate probably still has further to fall simply because there is still way too much supply. But even after it does find a bottom it will just grind around down there for a decade or more.

    Gold, and more importantly silver have been in a 10 year bull market. That won't end until everyone piles into gold like they piled into tech stocks or real estate.

    Obviously we are still a long way from that kind of mania. So one can either live in the past hoping for the return of a popped bubble or they can smell the coffee and get on board the new bull market.

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  13. Gary,

    I speculate that since the big hit down to the illuminati signature 666 on the S & P, the rules were changed so that the Fed could now intervene in the markets in a much larger way. Before the crash, there wasn't the legal means to steer the market, daily, like we've seen since then. You must admit, the market moves and trades unlike anything we've ever seen and is rife with intervention. It's like bumper bowling now, or bringing the hoop down so everybody can dunk! Before the bailouts, each mega bank was its own individual marauding pillager selling fraudulent loans, betting against them with credit default swaps, then selling all the loans packaged in MBS around the world like one big drunk ponzi daisy chain letter. Then, as the whole thing went bust, they then saved their precious inner elite and today they're all galvanized as a huge cartel acting as de facto price managers. The name of the game is bailouts, money printing, and debt monetization with no anchor for any currency around the world! We're all just floating around in a Keynesian anti gravity inflationary nightmare where rates can't be raised and deflation can't be allowed to take hold longer than a brief 5 minute selloff in the morning sometimes before the "dip" gets bought because we're in a new "bull market" per the Associated Politboro Press. In a 1984 Orwellian fascist bull market where Obama and Napolitano's face is in our face every day, I don't think we see any "downside". I mean we could be having WWIII with nothing more than algae growing on Main Street and the algorhythms would still make sure we've got green numbers at the end of the trading day! How silly this all is! This has to be the most unprecedented time of market intervention ever!

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  14. Actually the market looks very similar to 95. I guarantee the market will go back down into another leg of the secular bear market.

    The Fed can print money to try and prop up asset prices but they can't control where that liquidity ends up.

    It's why we are starting to see inflation spring up around the world. Eventually inflationary pressures will wreck the economy and send us into the next recession and the stock market will drop down into another cyclical bear market.

    Just because the market doesn't do what you think it should do in the time you think it should do it, doesn't mean the Fed can successfully manipulate the market.

    I assure you they won't be able to do it. Ultimately they will just create a much bigger problem with much more dire consequences.

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  15. Ultimately the elite will declare that all this fiat money leads to inflation (no kidding). Then they will usher in a global electronic reserve currency managed by IMF or BIS or World Bank or their like's, such as SDR or Bancor, in the name of managing incessant money printing in the hands of unscrupulous central bankers around the world. Whereas they were the original progenitors of the problem when they created the USD as reserve currency after WW II when the political power officially changed from Britain to the US. But this transition to SDR or Bancor will not be so smooth as we will have to face a WW III, as we are witnessing the so-called Islamic threat against Israel all around the Middle-East which will trigger a War soon.

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  16. Hey don't you know everything ends on December of 2012!
    So just be ready Ok?

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  17. What about $ appreciating for a while till turmoil rules the Middle East, Africa and ultimately parts of Asia?

    JPM selling gold (like IMF) would be foolishness. They may cause a temporary fall in gold prices but leave USA poorer as China and India will absorb all of this once the selling is over.

    Anish Poojara, India

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  18. So Toby, what is your assesment of current gold-silver non confirmation.
    I mean, silver is advancing relentlesly while gold is trying to catch up but it fails.
    Silver just made new high while gold hasn't.
    Is it time to be concerned?

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  19. Concerned about what?

    There is just a supply and demand imbalance in the silver market that is driving silver much faster than gold.

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  20. The way i see it,at current 43 GSR either gold has to explode to the upside or silver has to come down, since 20 year GSR low is at 38

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  21. The historical average is 20 though.

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  22. The only massive gold liquidation JP could pull off is in paper and not the real thing.

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  23. Who cares? If we are meant to die we will. If we are meant to live we will. Then we can tell of the past . Live and let live. Most Americans are stupid and are sheep.

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  24. Here, in Africa, we have sangomas who throw bones rather than draw graphs and who achieve about as much accuracy.

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  25. Robert,
    As I've said countless times. The charts are just meant to show general trajectories not actual targets.

    But I agree, pure technical analysis is for the most part worthless. It's why I focus on cycles, sentiment and money flows above everything else.

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  26. I suspect that they can engineer a gold seloff pretty much any time they want. In fact, they just did it in January. Only problem is that silver barely budged and the gold:silver ratio collapsed.

    I suspect that Asins are trying to corner the silver market, or just buying up every available ounce merely for inflation protection.

    As a talking point, lets say they pound gold back down again, and again silver barely drops, maybe staying above $30/oz. That will just collapse the gold:silver ratio some more. That will, in turn cause even more folks to panic into silver.

    The risk:reward ratio is starting to move against pounding gold. At least with gold moving up slowly, they can slow down silver a little.

    It is probably a moot point, if all the talk of a physical shortage of silver is true.

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  27. Nobody "engineered" a sell off.

    Gold just dropped down into a normal profit taking event. Intermediate cycle corrections happen like clockwork about every 20-25 weeks on average and have been going on for decades.

    Folks it's just normal bull market action.

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  28. I don't think the word 'normal' is the right word. Since the QE2 chatter started in August, the Venture Exchange composite has gone parabolic. This is where most of the world's microcap gold and silver explorers are traded. Also, silver started going parabolic at the same time.

    And two months later a 30 year bond bull market topped and reversed. Not too often a 30 year bull market ends.

    It is quite obvious what is happening. Money is pouring out of bonds of all types, and going into silver and microcap gold and silver explorers.

    Wouldn't you expect the same rush into gold? Not that I care. I was already way overweight silver. I'm just surprised that gold is lagging. Seems strange.

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  29. There's nothing mysterious about it. Silver has been showing relative strength since early last fall.

    Obviously there is a supply and demand imbalance in the silver market that is causing silver to lead gold.

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  30. I'll give you credit for following Occam's Razor, which states (more or less) that when there are competing explanations for something, the simplest is usually the best. I think you are taking it to the extreme with your supply/demand explanation for silver's rise, however.

    The gold:silver ratio isn't dropping, it is collapsing. It is signally more than a short term mismatch between buyers and sellers, in my view.

    A key part of your analysis is that you think it is likely that the dollar will take out the March '08 low. That seems reasonable to me, given that we are buying our own debt. But you are suggesting that at slightly below that dollar level, Bernanke will wake up one day and slam the 'off' button on the printing presses and the dollar will rally. I highly doubt that.

    Over the last five months, US treasuries have collapsed in price, as the 10-yr yield has increased by 50%, from 2.4% to 3.6%. Over the same stretch of time the dollar has gone sideways. In other words, interest rates would have to rise much, much more to be dollar supportive. And what would happen to the federal budget deficit if interest rates go much, much higher?

    And since interest on the debt would start to become a much larger component of the budget, and budget deficit, a self reinforcing feedback loop of ever higher interest rates would be set in motion, if your scenario of no more QE2, 3, 4 was in play. Bernanke is committed to inflating away the debt. He has said as much.

    I'm sorry, but your scenario makes no sense. The dollar isn't going to rally while the deficit is wildly increasing above 10% of GDP.

    The thing that would be dollar supportive is if they cut foreign spending in a huge way (Iraq, Afganistan, Korea) and left domestic spending alone, and narrowed the deficit in this manner. But they are determined to do the opposite (leave foreign spending alone and cut domestic spending).

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  31. can virtually guarantee we will see a monster rally in the dollar. It always happens as the dollar rallies out of a three year cycle low. Usually it lasts at least a year.

    I doubt this cycle will be any different than any of the other cycles for the last 40 or so years.

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  32. BY the way the rally occurs because too many people get on one side of the trade. When that happens we run out of sellers. The dollar has no where to go but up.

    It has nothing to do with fundamentals, it's just how markets move, especially bear markets.

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  33. The US will create another paper currency if this one collapses just like every other country in recent history has done after a hyperinflation has occurred.

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  34. Funny you should say that about M/H park, ED. No big deal but I've bought half of one over the past 3 months.

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  36. Hi Guys
    I'm new to this sheet,, and I've been involved in a small denomination gold bullion program that is launching in both the U.S., as well as Canada, in the next two weeks.
    The company has been in existence for sixteen years in Europe, and projects to make billions in the next coming months (before the riots). This greenback is about to drop like a stone in the not very distant future. So if I was you Gary, I'd turn your trailer park into silver, so you can afford to live indoors, when the shit hits the preverbal fan, comprende.

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  37. What would be the effect if our government froze the printing of any currency for a year?

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  38. What would be the effect if our government froze the printing of any currency for a year?

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  39. Ben will have to quit printing once the dollar crisis starts to intensify or he will not only break the currency but also the bond market. When he does the economy will quickly roll over again just like it did last summer when QE1 came to an end.

    There is no way out of this. At some point we will have to suffer another recession/depression or we destroy the currency and bond market. There is no third choice.

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  40. Fernando.... Are you using acid?

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  41. In response to fernando: Were you one of the poor guys that got caught up in madeoffs scheme? Where are you coming up with these numbers? Dude..... PAY CLOSER ATTENTION............

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  42. @ fernando... I agree with the fact were gonna see a huge squeeze from the big boys... if it does really happen its only a scare tactic.

    Once a person truly understands the ponzi scheme central banking system, how the hell can anyone think the dollar is to be saved? If there is a way please explain.

    JP Morgan and big guys will squeeze to drop prices to scare people. In fact I could see going as far $5 an ounce in silver to scare the hell out of those rallying on the bull market, but then as soon as it hits low they are gonna buy buy buy buy buy buy and youre gonna see the biggest spike in Gold and Silver you could ever imagine... and you my friend wish you would have been stock piling the 5000 year history proven currency of Gold and Silver instead of the not so history proven 235 year US Dollar that will be worth some kindling in the trash can at central park to keep your toes warm.

    If I am wrong someone please feel free to layout it and explain to me other wise as a good Samaritan.

    Colton

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