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Stalking the Coming ICLs
March 11, 2012

The dollar made a strong point on Friday. Following a Thursday decline which got dollar bears excited, the buck reversed course and surged to a new daily cycle high. This action is very bullish. Left-translated dollar cycles simply do not behave this way, so we can mark the arrival of a new intermediate cycle with confidence. We should now see several weeks of general strength for the dollar.

DX Weekly

My expectation is to see the dollar rally only long enough to knock equities into their own ICL. Depending on what equities do over the next couple of weeks, the dollar's ascent could last 4-8 more weeks. Ultimately, however, I expect this new intermediate cycle to form as LT and fail as the dollar sinks into a yearly cycle low in early summer.

With the dollar in rally mode, equities should roll into an intermediate-degree decline. While stocks could conceivably resist a dollar rally for another week or two, my subjective view is that they will weaken sooner than later.

SPX Weekly

A swing high has the potential to mark... but does not guarantee... the commencement of an intermediate decline. However, if stocks were to manage a new high, I would view the action as an attempt by big players to throw stakes. Therefore, any rally is likely to see a quick reversal.

As with stocks, oil is poised for an intermediate decline of its own.

Oil Weekly

Once oil breaks its cycle trend line, we will have confirmation of a move into an ICL. I view the next ICL for oil as a superb buying opportunity. As noted since late December, I am very bullish on crude during these initial months of the 2.5-year commodity cycle. I expect oil to easily break out above last year's $115 high during the next cycle, and so oil futures will be a primary target for the Docfolio.

Another target for large purchases may be mining shares, but the action has to tempt me. If these shares suffer the mini-crash described in a recent post, I will be prepared to acquire heavy exposure. We will obviously keep a close eye on the sector.


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