From NFTRH12, dated 12/20/08:US Dollar
[chart omitted]
The Dollar should be a good measure of the current system’s ability to maintain itself. As you may know, I have been charting its course of late on the blog as it became wildly over bought in manic and compelling fashion and then swung to the opposite pole, reviled and cast aside by global mobs on the move.
Our Head & Shoulders topping pattern played out like a charm as weakening momentum indicators finally came into force. This shows the kind of non-committed support that was built into the Dollar’s run since July. Again, people who are compelled into something do not tend to be committed in any heartfelt way. The Dollar’s holders over the last four months were compelled by redemption, margin and the fear of losing everything. Thus, when the break came, it came in the form of a collapse. Mania, it never ends well.
One sign that the global bear market is not over and that peoples’ confidence in the system remains intact is the way casino patrons piled out of the USD and into the euro driving both to extremes. The Dollar became manic over sold in a very short time and now we are on the retrace. The 84-85 zone looks like a no-brainer short if it gets that high. The reaction could top out sooner however as the price gets closer to the now rapidly declining EMA 20. In the extreme, I expect the SMA 50 to act as strong resistance.
Of course, given the global casino’s ‘Uncle Buck against the world’ orientation, I would expect my lone bullish stance, the gold stocks, to finish up their correction at whatever time the Dollar decides to top out. Again, the same forces that drove USD higher drove the gold miner fundamentals higher as well. This is another looking glass into the idea that the global casino remains active; they are still going by cartoon analysis that says a strong Dollar has to be bad for all aspects of the ‘resource’ trade. This despite the hard evidence for all to see in our gold-oil, gold-GYX, gold-silver and gold-IRX charts. Importantly, we can now add gold-TNX (10 year rates) and gold-TYX (30 year rates) to the gold-human hopes for prosperity ratios.
Well, with all this talk of gold stocks, why don’t we just transition to this sector next…
