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June 6, 2013

Dollar Poised for Major Decline

With today's drop, the U.S. Dollar Index delivered an important message regarding market action for the next 3-5 months. You see, the DX performed more than just a routine back-test of its 200DMA. The dollar also dropped below its early-May low.

This violation is important for a couple of reasons. First, a failed daily cycle indicates the weekly... or intermediate... cycle is in decline. Since the intermediate cycle is only five weeks old at this time, the dollar is facing 3-5 months of downside before the cycle finds a low. Second, a yearly cycle low is due for the buck at the end of the current weekly cycle, indicating the potential for a particularly vicious decline. For reasons discussed in the Member Letter, such a decline should be bullish for precious metals but bearish for equities.

Certain confirmations still need to be achieved, but gold and silver may finally be set to break out of their funk.

 

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