Today the dollar broke down violently from the recent crawling pattern that has been forming along the 50 DMA. When these patterns break down they tend to move aggressively, usually down to at least the 200 DMA .
I'm not at all sure the dollar will stop at the 200 DMA though and here's why.
We've already seen a mini-crisis in the Euro. We know the Fed printed trillions of dollars during the period of QE. You simply can't debase a currency that way and not have repercussions.
I suspect we are about to see the crisis that started in the Euro spill into the dollar. (This is how currency problems unfold they tend to spread like a cancer into other currencies.)
Don't forget we have a major three year cycle low coming due next year in the dollar. Just on a cyclical basis the dollar is due to start moving down into that low. But we definitely have a fundamental driver for the move in the Fed's insane monetary policy. Trust me Bernanke isn't going to get off scott free from his printing spree. The market is going to make him pay a terrible price for his foolishness.
That price may be about to come due.
Needless to say once the cancer spreads into the dollar it is going to power the next leg of the ongoing C-wave in gold.
Now isn't the time to let emotions control you, the correction in gold could end at any time. If you aren't on board you will quickly find yourself chasing an overbought market.
Now more than ever investors need to heed Old Turkey's wisdom.
Turkeys get eaten every Thanksgiving. What now?
ReplyDeleteAt the end of the day, folks will sell what ever they have to get cash money for what ever price they can get. Gold, stocks, what ever. The outflows from Mutual Funds for the last few months have been off the charts which couldn't come at a worse time with the stock market in the tank. Redemptions lead to more selling, which leads to lower pricing, which leads to more selling, on and on. Funds took profits on Gold today to meet margin calls being caught with their pants down by having the lowest cash reserves in years, a very dangerous situation. Sometimes it's not all about what investments are best. If you have margin calls, or need to eat, or are scared, you just want cash. There's a lot of all 3 of the above going around. Gold might be great, but it will be sold like everything else to meet cash crunches. Just keeping it real man.
ReplyDeleteShort term Miramar short term.
ReplyDeleteI think by this time most of the readers of this blog have learned their lesson and are no longer concerned with short term moves. By far the vast majority are now long term investors who just want to ride the bull to it's completion.
Unless someone is leveraged (I've been warning everyone for months not to get leveraged. Hopefully they listened) there is no reason for them to panic out of gold. By now most subscribers here are on their way to strong hand status or understand clearly what it takes to reach that level.
Some like the fella this afternoon who has been invested since 03 are into such gigantic profits that no correction can kick them out.
In order to reach that level one has to just take a position and hold on. That kind of strength takes years to attain but the reward is beyond anything that most people can even dream of.
Gary, many a time you have mentioned before that 75% of the time, the initial breakout is fake. If that logic does hold, would we not see the dollar surge back up again?
ReplyDelete-Seonhong
Hmm ... that is a breakdown not a breakout.
ReplyDeletePopulation aging, loss of jobs and income, strinking of State budgets and tax base, RE values declining, loss of available credit, etc. none are short term issues. They all create the same thing, a need for cash. To generate cash, sell assets, period. Not a short term problem at all. Gold is at pretty much an all time high? That just might put it in the rifle scope like it was today. If Gold can go higher in a deflationary environment long term it will be against all odds.
ReplyDeleteGOLD: Waiting patiently for the reversal back up from oversold - we're not there yet. ZSL for now.
ReplyDeleteUSD: I'm still learning how it trades long term - Gary is a great coach on this - he challenges you to think about long term trends and understands fundamentals. But short term, I'm expecting a buy opp to come soon... watching daily charts.
Like I always say no long term bull market in history has ever ended until it entered the bubble stage. The gold bull will be no different and I don't believe for a second that CB's will allow deflation.
ReplyDeleteBen will be true to his word and drop money from helicopters before he allows that to happen.
If you will remember your history deflation in the 30's was halted by devaluing the dollar.
In a purely fiat system deflation is a choice not an inevitability. Ben has made it very clear he will not choose deflation.
If I'm right about the cancer spilling into the dollar we are on the verge of an inflationary mess already.
Miramar,
ReplyDeleteYou already went down this road once in Feb. and you ended up looking like a fool. Do you really want to go down that road again?
Just get on board the gold bull and start the journey to riches.
GOLD loves deflation almost as much as hyperinflation, miramar.
ReplyDelete"Some like the fella this afternoon who has been invested since 03 are into such gigantic profits that no correction can kick them out."
ReplyDeleteGary
You know that was Uncle Warren.
HAHAHAHA. Bloviating idot.(not u G-man)
My point is that one can't get to that level unless they are willing to hold their position.
ReplyDeletePersonally I would prefer to side step D-waves if possible but all in all anyone who just goes on vacation and comes back in a couple of years is going to be a very rich man.
Meanwhile all these trader types will have made nothing.
Personally if I have to hold through corrections but the reward is to get rich as opposed to freaking out like the traders and making nothing I choose rich :)
Thanks for the input mirmar. I agree partly with what you mention in the short-run, but I believe in the presses in the long-run.
ReplyDeleteSometimes, people are voicing concerns and beliefs that may challange our views...this is healthy....let's not discourage this from the few that will challenge but are not acting like SOBs. There a couple, I imagine that are following this blog blindly, believing in the herd opposed to the bull. This is not good either.
So true if you don't believe in the bull then you have no business investing in it. Just buy treasuries.
ReplyDelete"In a purely fiat system deflation is a choice not an inevitability. Ben has made it very clear he will not choose deflation."
ReplyDeleteVery succinctly put, Gary. That's the case for Gold in a nutshell.
Thanks