US Dollar Forecast - Weakness

The rise in the US 10 yr as pulled up the US dollar, but soon the trillions of new money printing will soon pressure the dollar south.
 

We can see below the dollar 'T Theory' cycle suggesting we near done, and a period of change is due in the next 4 to 6 months. Notice how neatly the US dollar fits into even weekly time periods.  


The recent US dollar strength had to happen as EVERY ONE was short the US dollar, as the short energy for hitting the ASK BUTTON just dried up, these past six weeks have set up a nice bounce to smash the US dollar ASK once again over the next 4 to 6 months.

MI2Partners posted this 20 year US Trade Weighted Index (TWI) model on twitter, here. 

@MI2Partners In #macroeconomics, when you get the direction of the #USdollar right, the rest falls into place. Triffin’s Dilemma reminds us of the inconsistencies in domestic & international goals. The consequences for the #dollar will be profound

As you can see their forecast is for a new 20 year low in the TWI.

Of course this (or just half of the crash) would create a hyperinflation risk on rally, just like the DOW in 1929 or 1987, and just before US mid terms. Hmmm typical!

readtheticker.com US dollar model (below) suggest new lows for the DXY.

Main drivers are European banks are doing better (or less worse) compared to US banks, add on the comparison of core inflation between the US and Europe and lower DXY lows can be expected.

CRAZY has not even started yet!





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Silver and Time Counts

Some spooky wizardry showing off the relationships of price highs and lows to each other.


William Gann methods were written 60 years ago, and he used hand drawn charts (OMG). Today we can use a fancy 'T Theory' graphic tool to do Gann Time Counts with ease. 

Put your silver tin foil hat on and be amazed.

Chart in video

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1940s Yield Curve Control Review

Yield curve control was operational during and post World War 2 for a 9 year period.


The US stacked up a huge national war debt. With war comes with higher inflation, this time higher inflation could not be allowed to be followed by higher interest rates as the national income could not pay the interest bill and a sovereign debt default would follow. The response by the Federal reserve was to cap interest rates near 2.5% to contain the interest expense.

The chart below shows this period.

In the chart below while inflation (CPI) is above the 10 year interest rate this is known as 'negative yield' and purchasing power destruction of the currency (USD), hence why funds will flow into anti US dollar trades like gold, silver, bitcoin and oil.

The bond holders become the investors holding the short stick as inflation destroyers their capital, stocks do well, commodities do well. The problem for the FED is the bond holders are massive in number and for the FED to contain their selling they would have to buy all which is sold or convince this class of investor that it is best for national interest that they 'do not sell' and take the loss for the good of the nation. During World War 2 the bond investors made this patriotic choice, today maybe not so much, hence the FED buying could be exponential.   


Today the FED is jawboning the idea of yield curve control for a period of 2 years.


POINT: The FED's choice is to trash the dollar to save the economy, or trash the economy to save the dollar. 

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Who is King? The Bond Market or the FED

The King Arthur story is battle between a false KING and the true KING.
Generally the movie involves surprises, love and violence, and all this coming to the risk on markets very soon. 

The financial blog space expects the FED to do some sort of Yield Curve Control (YCC) to hold interest rates down while inflation moves higher, this is allowing inflation to run hot. The FED wishes to do this over time to deflate the debt away. Very similar to the 1940's post WW2, yields were pegged to 2% and risk on assets went sky high.

However Peter Boockvar suggest the FED may soon learn it is not in control and the true king of the markets is the BOND MARKET. Peter says simply the bond market is telling the FED to bite me!

The FED is not used to taking second fiddle to any challenger, and you can bet the FED will not give up the chair of market king easily, and they will try to smash the bond market into submission with forms YCC, TWIST and more QE.

Of course if the FED fails, all markets will be repriced to the new cost of money and you can bet the market violence will be spectacular.

The pressure of future inflation agrees with current bullish up swing in the cycle below.

Long term cycles, bullish for higher interest rates, inflation, commodities. Notice the 1940's period and how flat interest rates were, and what happened in the 1950's and after.

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The Fastest Money

The fast money happens near the end of the long trend.


Securities which attract a popular following by both the public and professionals investors tend to repeat the same sentiment over their bull phase. The chart below is the map of said sentiment.

Video on the subject.

Charts in the video

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Silver Review

We used to say billions, now its trillions of money printing, and investors are hunting for a way to defend their purchasing power, silver is one way to do so.



Lets review silver with Elliot wave, Wyckoff, Cycles and Fractals.

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Which to trade? Fundamentals or Technicals

Best to trade technical's, best to trade fundamentals, best to trade technical's, etc.



Consider Paul Tudor Jones quote below.

.."Fundamentals might be good for the first third or first 50 or 60 percent of a move, but the last third of a great bull market is typically a blow-off, whereas the mania runs wild and prices go parabolic. There is no training, classroom or otherwise, that can prepare for trading the last third of a move, whether it's the end of a bull market or the end of a bear market."...

In short, markets start with macro but in the end they are more like a ponzi. 


Which is best to trade fundamentals or technical's?


The answer is both and with different weights at different stages of the market, in the early part of the market fundamentals will have more weight, but as the market matures fundamentals must be balanced with the technical's. Because a market involves humans, and fear are greed are at work, more so when prices are extreme.



To demonstrate the above listen to this very good fundamental chat on Ethereum. 

At the 41.40 min mark Raoul Pal answers the question as to a possible price forecast of Ethereum, he says:

.."nobody can think is exponential terms, humans are incapable of this"...

So there you have it after 40 minutes fundamental chat, price is determined by humans in a free market environment of greed (demand) and fear (supply). Technical's are used to measure lows and extremes of greed and fear, just like the price channels below:

But in the end even Ponzi met reality.

..."The minute you get away from the fundamentals – whether it’s proper technique, work ethic, or mental preparation – the bottom can fall out of your game"...

Basketball Legend Michael Jordan

The only thing in mania markets is a minute can be weeks, months or years.





 

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