I have been saying for some time now that our current situation is very similar to Q1 of 2008. I'll get to that in a minute but first a quick look at the price action of the US Dollar in the last hour or so.
|Click on the chart to ENLARGE|
This is a daily chart of the US Dollar continuous contract. The current daily cycle began with a low of 76.12 which was taken out to the downside after the market closed yesterday, Wednesday. In the mean time, this price level was assaulted just a couple hours ago and the dollar was dropped all the way to 75.85.
The implication for the dollar is ominous as it has become both a bearish left translated cycle topping in only 4 days, but also a failed cycle as it has taken out the previous low of 76.12 in just 8 days. The annual cycle low established last November at 75.63 appears to be the next destination. After that it could be quite a fall for the dollar with 71 as a possible target.
I have made a chart, actually it is something of a collage of charts, to communicate where I think we could be headed next. I believe that Q1 2008 was a period of time in which the same dynamics were in play as today. The stock market was just beginning to roll over into what turned out to be a protracted and very painful bear market leg - ultimately taking the S&P from prices north of 1500 to 666. The dollar began a series of left translated daily cycles that then took out the annual cycle low and continued south with panic intensity. Gold, silver and their miners were at the half way point toward the completion of their C wave. Ultimately, both gold and silver finished that C wave with a parabolic finale.
So, here is my collage detailing the price movement of mid December 2007 to mid March 2008 in the US Dollar, S&P, HUI miner index, Gold and Silver. It seems to me that recent projections of $1600 gold and $50 silver are still very realistically possible.