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August 27, 2009

Dollar Addendum

As corroborating evidence to the short squeeze hypothesis described in the previous post, I'd like to point out that the 5th wave of the dollar's decline off its March high has yet to complete.

dollar chart

A quick drop to 76 would certainly induce some panic buying in stocks and wash out heavy short positions just in time for the dollar to begin its counter-trend rally and knock the socks off the rally. We should then see the buck form a grinding A-B-C correction over a 2-3 month period, ultimately tagging its 200DMA before moving into another 5-wave decline. It is during this subsequent 5-waver that I expect to see precious metals reach for the stars.

 

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