Earlier today I wrote about the apparent freight train that the stock market has become. Then this evening I was poking around, looking at this and that. Then I looked at the continuous contract for the US Dollar.
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I could NOT believe my eyes.
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Instantly I thought to myself, 'wow - look at that! That is incredible!!'
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In a flash I then understood - for myself - why gold and silver had been rising so sharply this week, and why the stock market had turned into this irrational freight train loaded with too many bulls to the ceilings.
The US Dollar is really going to dive ...... take a look at the chart.
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The True Strength Index (TSI) indicator has not only convincingly made a bearish ZERO crossover, but the rising trend line from the last 3 months has been obliterated.
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Click on the chart to ENLARGE
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If this development continues, as I strongly suspect it will, the implications are rather enormous for the immediate months. Primarily, we will get the parabolic rise that so often climaxes gold C waves, silver will continue higher, much higher. PAL (Palladium mining stock) will go to the sun, as I wrote in an article recently. The stock market will also continue to drift higher as money flees cash and tries to find a place to hide. But eventually the bear stock market will turn on itself as companies find it increasingly difficult to make a profit with inflating commodity and energy prices. And the best place for appreciation going forward, the only sector in a true secular bull market, will be the precious metals complex (in my opinion).
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Well, I guess Ben's adding $12 Billion a day to the supply of cash is finally taking a hold of our currency. You can't get something for nothing. You can't print money out of thin air and still pretend to be affluent. It can only work like that for so long and then the piper has to be payed. Solving a credit card problem with a credit card is no solution - unless you think like Ben. As the US Dollar declines, cash will not be king. Instead, it will be gold, silver, platinum and palladium. Enjoy the ride, because it looks like it is on the way!
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Thanks for the great site. From your USD chart, I see that the same conditions existed prior to the resumption of the uptrend for the USD in April 2010. Could this not happen here? I don't see that a major move down in the USD will necessarily happen. Instead, we could see a similar situation to April. Can you enlighten me on what has you convinced of a larger move down in the USD? Can you hazard an estimate of the potential downside on the USD? TIA
ReplyDeleteAlesund - great observation re: April 2010! That was the ending point of QE1. Ben stopped printing dollars, and the dollar shot up.
ReplyDeleteAlso, and we should BOTH keep an eye on this, that 'near identical' setup was corrected with a new trend line break buy signal in just 5 days. The trajectory of the current situation will likely take more than 5 days to break, but trying to be open minded, it could 'theoretically' be broken in a couple weeks. Let's see if that happens.
In the meantime, with QE2 is full swing I am comfortable investing with the notion that 'it ain't gonna happen' and will keep an eye on it as we go forward. Knowing that the timing coincident of QE1 - turning off the money spigot - and QE2 turning on the money spigot are events that are opposite and it should be expected to conceive opposite results.
Downside potential for US Dollar would be a retest of the 2008 lows around 71.
Hope you've been keeping your eyes on Alamo Energy ALME (gas and oil). It's been very profitable for me and it's set to get upgraded to the AMEX once it goes over $2.
ReplyDeleteI gotta agree about the dollar.. like I've said before, with the massive US debt and printing of money, the dollar is bound to go into freefall at some point. The only thing stopping that from happening at the moment is the euro situation.