We all better hope I’m wrong on this one, but I think the CRB just put in its three year cycle low in October. I’m also afraid that Bernanke has done irreparable damage to the dollar. If I’m right about both of those assumptions then we are on the brink of a historic inflationary period.
I’ve marked the major three year cycle bottoms in both the CRB index and the dollar in the chart below with blue arrows. (Actually the CRB cycle tends to run about two and half years on average.)
The dollar is now a great risk of forming a left translated three year cycle. A break below the October 27 intraday low would initiate a pattern of lower lows and lower highs of an intermediate degree.That is usually a sign that a major cycle has topped. If the dollar’s three year cycle has topped after only five months we will be at great risk of a severe currency crisis in the fall of 2014 when the next three year cycle low is due.
Even more concerning is if the CRB cycle has bottomed. If it has then commodities are poised for a huge surge higher during the next two years as the dollar deteriorates.
The next two weeks are going to be critical for the dollar. It must hold above the October 27 low. Failure to do so would indicate that the cancer has now infected the currency markets, most specifically the US dollar.
If this scenario unfolds it has the potential to drive the bubble phase of the gold bull market.