“I can’t tell you how many talking heads I’ve watched in the media recently touting the strong dollar. Sometimes I really wonder whether Homo sapiens are an intelligent life form. Remember, this is the same species that created the Tulip mania … and the tech, and real estate bubble.
Folks, in the real world it just isn’t possible to have a strong dollar if you are counterfeiting 85 billion of them a month. That’s just basic common sense, which seems to be an extremely rare commodity in the world today.
Yes, markets can be irrational because humans are driven by emotions. When something goes up or down for a long period of time, our emotions invent reasons for why it’s happening. We convince ourselves that a tulip bulb really is worth more than a house. We justify skyrocketing housing prices far above average income levels by inventing a fantasy that we are running out of land. Of course no amount of fantasy means we can escape reality, just that the longer the illusion extends the bigger the bubble grows before is pops. But there is never any doubt it is going to pop.
There is one reason and one reason only why the dollar index has the illusion of being strong (let’s face it, at 82 the dollar is hardly strong. In 2000 the dollar index was at 120).
The dollar is strong lately because the yen, pound, euro and Canadian dollar have all been dropping sharply into major intermediate and yearly cycle lows.
This is pushing the dollar index up. It doesn’t mean the dollar is strong, just that most of the currencies that the dollar index is measured against are exceptionally weak at the moment. But that may be changing.
On Friday, the dollar broke down and breached the intermediate trend line. This is often the first warning sign that an intermediate cycle has topped.
If the last daily cycle pivot is broken (lower low) it will almost certainly confirm that the dollar has begun an intermediate decline.
There is now extreme risk that the second daily cycle has topped on day 2. That is one of, if not the most extreme left translations I can remember, and is likely to lead to a very large decline over the duration of this daily cycle. Keep in mind there should be another 2 or 3 daily cycles down after this one before the final yearly cycle low sometime in June or early July.
If the dollar daily cycle has topped on day two, then the dollar is setting up to take a real beating over the next couple of months. I’m afraid reality is about to return to the dollar, and the consequences of printing a trillion dollars a year are about to be begin.
Next I want to discuss another subject that should be easily visible, but again a lack of basic common sense prevents most people from seeing what’s right in front of them….”
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