3 weeks, that’s how long the bulls have left before stocks roll over and begin the next intermediate degree decline. That being said the next 2-3 weeks we should see some very healthy gains in virtually all asset classes. Why is that you ask? Because the dollar has begun moving down into an intermediate degree correction.
As of Friday the dollar was on the 11th day of its current daily cycle. The normal duration of a daily cycle is 18 to 28 days, with the average being about 23 or 24 days. That would suggest that the dollar should bottom somewhere around August 21st or 22nd. As you can see in the chart below whenever the dollar moves down into an intermediate degree trough it generates strong gains in asset prices.
What follows once the dollar bottoms and the next intermediate degree rally begins is not going to be pretty. Stocks are going to start to struggle and ultimately move down hard in September and probably October if the Fed doesn’t unleash QE3 at the September FOMC meeting.
By the end of August, and certainly by the time we get into September the markets are going to call central bankers bluff, and it is going to take more than words and the threat of quantitative easing to keep asset prices propped up.
I have covered the rest of the forecast in depth in the weekend report available to premium subscribers.
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