Currency

The Critical USD Determines The Path of All Other Assets: Can Bernanke Break the Dollar Rally?

In response to a bursting real estate and credit bubble in 2007 Bernanke’s solution was to crank up the printing press and flood the world with dollar bills. Unfortunately it didn’t solve our problems, it only made them worse. The real estate and credit bubbles stayed busted, but that liquidity had to land somewhere. In 2008 it went straight into the energy and agricultural markets spiking the price of crude, gasoline and food. This in turn collapsed a fragile global economy that was already reeling from the real estate implosion. The end result was the exact opposite of what Benjamin intended. Instead of halting the real estate collapse he just magnified the severity of the recession.

Unfortunately Bernanke has not learned from his past mistakes. The wicked sell off in 2010 was met with QE2. The even more severe decline in 2011, which should have initiated the next bear market and started the move down into the next four year cycle low, due in 2012, was aborted with additional money printing disguised as Operation Twist and the European version LTRO. 

On the surface it looks like Bernanke has been successful. The economy has rebounded from near recession in 2011 but the unintended consequences are already in play as oil is now back above $100 a barrel and gasoline over $4 a gallon. Bernanke has steered the Titanic straight into the iceberg and now there’s no turning back. If Ben doesn’t raise rates and drain excess liquidity oil is going to continue to rise until it destroys the global economy again. 

The dollar is at a very important juncture. The current daily cycle topped on day 11 which is right in the middle of being left or right translated. Left translated cycles are the hallmark of a declining market (lower lows and lower highs).

left translated cycles

Right translated cycles are associated with rising markets (higher highs and higher lows). 

right translated cycles

How this cycle plays out is going to determine the path for all other assets. The current daily cycle topped right in the middle of being right or left translated. As long as the impending cycle low holds above the February intermediate degree bottom then the pattern of higher highs and higher lows will still be intact and the dollar will still be on the upside of an intermediate cycle.

dollar rising cycle scenario

In this scenario I would expect the stock market to roll over soon and begin moving down into an intermediate cycle low in late April or early May. Gold’s B-wave would resume after a short counter trend bounce and continue down to test the December lows. 

gold lower scenario

If however, the dollar were to penetrate the February low it would signal that the intermediate cycle has already topped and the pattern has reversed to lower lows and lower highs. In that scenario we should see the dollar moving generally lower for the next 15-20 weeks. 

dollar falling cycle scenario

In this scenario the runaway move in the stock market could continue for another 10-15 weeks, and gold’s B-wave probably bottomed on Thursday as another shortened intermediate cycle. 

gold higher scenario

This scenario would also trigger another leg higher for oil which will eventually poison the economic recovery.  

The next couple of weeks are going to be important. I’m expecting the first scenario where the dollar continues to make higher highs and higher lows, but I’m prepared to reverse course 180 degrees if Bernanke can break the rally and push the dollar through the February 29 low.

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Simply “The World’s Most Valuable Asset in a Time of Crisis”

There’s one reliable, common and briliant investment that has proved to be even better than gold or silver in crisis. In fact, since 1970, a year before the U.S. went off the gold standard, this investment has easily outpaced both stocks and gold.

Farmland vs Gold - SP 500

Its certainly reasonable to expect a crisis of the US losing Reserve Currency status and the ability to fund its spending/deficits too,  given its borrowing 40 cents of every dollar it spends & Obama has added more debt than all of the Presidents in history:

Its FARMLAND: Click on either chart or HERE to read the full report

path to prosperity1

The Unstoppable US Equity Rally In Perspective

20120327 DB3And the S&P 500 has only risen by more than this on six other occasions after a 10% drawdown…and many of those were during some of the most crisis prone periods this nation has ever experienced.

Gold Juniors Cobra Coil “looks extremely bullish”

The GLDX chart looks extremely bullish. Almost every indicator and oscillator is flashing light or heavy buy signals, while price itself coils into a fabulous wedge pattern, like a king cobra poised to strike at the hearts of your dollarbug foes!

Screen shot 2012-03-28 at 2.18.02 AM

Screen shot 2012-03-28 at 2.18.02 AM

Mar 27, 2012
Mainstream media tells you that the Dow soared yesterday. Maybe it did, against the dollar. Against gold, the Dow fell. Please click here now. Gold is potentially set to outperform both the dollar and the Dow, in a very big way, in a very short amount of time.

The same is true for silver. I talked yesterday about what I’ve termed the “wedgification” of the gold chart. Wedgification is not a real word. It is a term I coined, like “head and shouldering”, to describe the process where one chart pattern displays fractal-like action, morphing repeatedly into ever-larger patterns of the same type.

A small head and shoulders pattern can become the head of a larger head and shoulders pattern. Likewise, the initial and very bullish gold wedge has just become overpowered by an even larger wedge.

In the case of silver, there is a process going on that I’ve termed “rectangularization”. Please click here now. Note the black supply line that I’ve highlighted at point “A” on the chart.

Now look at point “B”. That’s the price area that was rightfully called a “breakout” by most silver investors. Breakouts should never be bought by anyone other than gamblers. A breakout indicates the potential coming profits on positions already bought at much lower prices.

The breakout at point B was a very positive event for the silver market.  Now, make note of point “C”. That’s the point where silver suddenly declined as the bond market began to fall. Now that the silver price has spent some time well below point C, you can draw in a new supply line across that point.

You can now see the “rectangularization” of the silver chart in play, as an even bigger drifting rectangle is now visible on the chart. Bigger price patterns have bigger price targets.

The reason I push the gold community so hard about building emotional strength to manage growing volatility in the gold price is because the upside is so enormous.

In this epic crisis, if you can’t endure gold dropping a few hundred dollars an ounce you’ll likely never make it to the “honeypot zone”.

The t-bond has been put onto the radar screens of most institutional money managers. Rising interest rates can negatively affect gold in the short term. Yesterday, you received some good news, in the form of statements made by Ben Bernanke about the need to maintain “accommodative” monetary policy.

I’m not sure how many investors looked at the bond chart as Dr. Bernanke made those statements, but there was not much in the way of celebration, and that remains a concern. Please click here now. You can see that the bond did not exactly cheer as the head of the Fed spoke.

Note the price resistance in the 139 area on that chart. It’s going to be important to watch how the bond price acts if there is a rally towards 139.

One of the most bearish charts I see in any major market right now is the monthly bond chart. To view a veritable “landslide of sell signals”, please click here now.

How do you, the investor, reconcile the horrific picture on the bond chart against the ultra-bullish picture on the gold chart? You start by strengthening yourself emotionally to deal with the fact that surprise, not prediction, is the theme of this crisis.

Another “chart of horrors” that I’d like you to focus on is the US dollar monthly chart. Please click here now. The 14,3,3 Stochastics series has done a very good job of indicating tops in the dollar, and one such “top call” is in play now.

Bond market players appear to be very negative about the prospects for QE3, while gold market players seem to believe that a collapse in the bond will be quickly followed by an even bigger collapse in the dollar.

The appearance of both the gold and bond charts seem to indicate this is an accurate picture of the “liquidity flows posturing” of the largest major market players.

To view the “gold wedgification” chart, please click here now. Look at how the supply line drawn through high price of point “A” and the demand line combined to create a powerful wedge pattern.

Within the wedge there is head and shouldering action, but the overall picture is that of a wedge, not a head and shoulders pattern.

Now, make note of the supply line drawn through point “B”. Coupled with the same demand line, there is now an even larger wedge pattern in play, which I’ve termed a “super wedge”.

Investors need to understand that the gold price can move hundreds of dollars in either direction and all that movement may do is create an even larger wedge pattern.

Generally speaking, gold stock investors were a little glum yesterday, as once again bullion blasted higher while their stocks mostly meandered or failed to perform. I talked yesterday about the need to be selective in your stock picking.

Please click here now. That is the GLDX-nyse gold juniors fund. Many investors were disappointed that GLDX failed to perform to the degree that GDXJ-nyse did yesterday. Patience is required in a super-crisis, but I think your time to shine is finally here.

The GLDX chart looks extremely bullish. Almost every indicator and oscillator is flashing light or heavy buy signals, while price itself coils into a fabulous wedge pattern, like a king cobra poised to strike at the hearts of your dollarbug foes!

Mar 27, 2012
Stewart Thomson
Graceland Updates
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Tuesday Mar 27, 2012
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Screen shot 2012-03-28 at 2.58.03 AM

Canada is sitting on an Ocean of money. 2 Trillion Barrels of Oil! is a massively more than our current status 175 Billion Barrels proven, which now ranks us #3 in the World after Venezuala & Saudi Arabia. Let this visual story (main chart below) convince you of the Massive Wealth, practically unimaginable change, opportunity & Prosperous Future in the offing.  2 Trillion is more than twice the entire reserves of OPEC. Bottom line, Canada’s Developing Oil Wealth combined with hungry customers like China & the easy to ship to US…….makes the Shieks of the Middle East begin to look like homeless paupers by comparison.

To realize this wealth, all Canada has to do is clean up the Worlds largest Natural Oil Spill.

For Larger Image Click HERE or on the image itself below:

oil-sands-in-canada-infographic