3 weeks, that's how long the bulls
have left before stocks roll over and begin the next intermediate degree
decline. That being said, the next 2-3 weeks should yield some very
healthy gains in virtually all asset classes. Why is that you wonder? Well, it's because
the dollar has begun moving down into an intermediate degree
correction which will, in the next few weeks, fuel the 'risk-on' trade.
As of Friday the dollar was on the
11th day of its current daily cycle. The normal duration of a the dollar index daily
cycle is 18 to 28 days, with the average being about 23 or 24 days.
This suggests that the dollar should bottom somewhere around
August 21st or 22nd. As you can see in the chart below whenever the
dollar moves down into an intermediate degree trough it generates
strong gains in asset prices.
What follows, once the dollar bottoms
and its next intermediate degree rally begins, is not going to be
pretty. Stocks are going to start to struggle and ultimately move
down hard in September and probably October if the Fed doesn't
unleash QE3 at the September FOMC meeting.
By the end of August and certainly
by the time we get into September the markets are going to call the central
bankers bluff, and it is going to take more than words and the
threat of quantitative easing to keep asset prices propped up.
I have covered the rest of the forecast in depth in the weekend report available to premium subscribers.
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