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 translation 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 their eyes.

I’m talking about inflation.

Now if you believe the government’s ridiculous CPI numbers, or the talking heads on TV, you might come to the conclusion that printing 85 billion dollars a month has no long term side effects. You would of course be 100% wrong. It causes inflation. Money printing always has, and always will cause inflation. This time is no different than any other time in history. I can assure you that Bernanke hasn’t been able to repeal the natural laws of the universe. As a matter of fact we have had massive inflation ever since the bottom in 2009.

Because the Fed targets asset prices, it tends to start in those areas that we don’t normally associate as inflationary. Let’s face it, no one is really going to freak out about a rising stock market, but that is the first sign of inflation. The Fed’s liquidity has to land on something, and it usually starts in the stock market first. Unfortunately it always eventually ends up in the commodity markets.

Folks no matter what anyone one tries to tell you, it’s not possible to print 10+ trillion dollars and not get inflation. The Fed would like the inflation to stay in the stock and real estate markets, but as we all know, it’s not possible to escape reality and the reality is that eventually that liquidity is going to leak out of the stock market and real estate markets and find its way into the commodity markets. It happened in 2008 and it’s going to happen again.

As you can see in the long term chart above inflation began in the stock market and real estate markets in the early 2000′s. It culminated in a massive parabolic spike in commodity prices in the summer of 2008 that destroyed the global economy and spiked oil to $147 a barrel and gold above $1,000 an oz.

This time will be no different. We have massive inflation in stocks and even an echo bubble forming in the real estate markets. Ultimately the story is going to end the same way as it did in 2008, with a stagnating stock market, a second crash in the housing market and another parabolic move in commodities. It absolutely will drive another C-wave advance in gold just like it did in 2008 and 2011. Only this time the move will be even bigger. As I’ve noted in several past reports, I’m confident that gold is forming a midpoint consolidation in a very large T1 pattern that should ultimately target about $3200-$3300 at the next C-wave top.

It doesn’t matter whether sovereign central banks impose short term manipulation or how irrational the short term movements get, nothing is going to alter reality and the reality is that printing a trillion dollars a year is going to drive another C-wave in gold’s secular bull market. End of story.

This is a sample of the weekend report. For a more detailed analysis of where I think currencies, stocks, oil and gold are headed I've made a one week trial subscription to the nightly newsletter available. Click on the link below.

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-- Posted Sunday, 24 March 2013 | Digg This Article