Dollar Bear Market
The first stage in a bear market begins with a severe drop below the 200 day moving average. This serves as the shot across the bow warning. Then there is usually at least one more attempt to recover the 200. When it fails the bear market starts in earnest. The dollar has dropped below the 200 this morning.
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I agree with Gary that stocks and precious metals can go up substancially over time. I disagree however with his bearish US dollar views. The main reason is that the Euro as a currency is totally toast in the coming years. Brexit was only a first sign of a total collapse of Europe as we know it.
Next year, there will be important elections in France, the Netherlands and Germany. Especially in France and Italy, the second en third-most important euro-countries, euro-sceptic parties will probably gain much, and will lead to a disinvolvement of the Euro over time. This practically means that the Euro will first fall to 0.75, and then will be replaced by national currencies again.
The US Index is almost 60% EUR/USD, so the USD Index will appreciate in the years to come, despite gains in gold. US stocks will rise because of capital flows from Europe. European stocks and gold will also rise because of a hedge against a big weak currency. This does say nothing about shorter term gains in EUR/USD. This can happen for example because of the US elections.
The failure is that Gary is totally blind for where Europe and the Euro is heading to. He would be a perfect bureaucrat for Brussels 😉
You really need to quit listening to Armstrong, he doesn’t know what he’s talking about. He missed the top in gold in 2011. He missed the bottom in gold (just like I predicted he would). And he’s still trying to find reasons for why gold will drop back down to test the lows.
And he has missed the bottom in the euro.
He’s nothing more than a big trend follower and this is why he misses these big turning points. Socrates is a scam of course. Neither man nor machine can see the future.
The euro is not going away and it’s not going to 0. As the economy in Europe improves the euro will rise. Unless you think Europe will remain in a perpetual recession. I’ve never seen one nor has history ever recorded one. All recessions end and I think the one in Europe is already coming to a close.
The simple fact is that the US printed about 12 trillion dollars from 2009 to 2015. There has to be consequences to that, and I can assure you the consequences are not going to be a strong dollar.
That thesis is incorrect.
Euro can break apart and fall substantially lower. They are a nation that produces nothing.
How many trillion of Euro was printed over the past few years? With NIRP continuing, how’s it possible euro can rise in the short term. You’re been calling for the dollar to fall apart over the past 6 months. It’s done nothing but held its strength.
Incorrect. The dollar has made a double top and lower lows during the time I’m been calling for a top.
The Dollar in recent years looks actually a lot like the S&P. Makes several tops, will eventually penetrate to the upside.
Especially when Trump will release the “USD Kraken”, a.k.a. bringing back the trillions of overseas money that US companies have. Trump will also lower taxes as a businessman and get the US economy going. Combine that with European capital inflows and the USD will simply explode.
You’re right Gary, the Euro will not and never go to zero. The Euro will be replaced again by national currencies, which will have certain value.
“As the economy in Europe improves the euro will rise.”
The economy of Europe is very difficult to improve:
– bad demographics compared to US (and importing difficult migrants with high social costs doesn’t solve anything – bad for government finances)
– capital flight out of Europe because of a currency that will be replaced
– negative interest rates compared to US (again, capital flight to US) – more ECB QE will only stimulate more capital flight to US
On the other hand we have the US Dollar. The US Dollar will go up with everything else:
– capital flight from in particular Europe and the rest of the world
– if Trump gets elected, he will get companies to move the locked up trillions of overseas dollars back to the US again
– US economy is the best house in a bad neighborhood
– US is the only one who is going to raise interest rates because of all the capital inflows that stimulates the US economy, and this will only stimulate more capital inflows
“The simple fact is that the US printed about 12 trillion dollars from 2009 to 2015. There has to be consequences to that, and I can assure you the consequences are not going to be a strong dollar. ”
That’s already been discounted by the markets. Fed haven’t done additional QE since quite some time. In contrast to it’s counterparts. It isn’t planning on doing more QE than it already has, again in contrast to it’s counterparts. The Fed’s balance sheet, it it’s balance sheet. Stop making up that the Fed is expanding QE all the time. They don’t at the moment.
Gary doens’t understand anything about capital movements. Gary is right that everything will go up. But it will be the US Dollar with everything else, not foreign currencies with everything else.
How many times have I gone against the crowd … and it turned out I was right and the crowd wrong?
I can do this because this is what cycle theory does. It tells you when the majority is on the wrong side of the trade.
Cycles are again saying the dollar is going down. Of course no one will listen to me.
Just like they didn’t listen to me when gold bottomed.
Just like they didn’t listen to me when I said oil was going to turn and go higher.
Just like they didn’t listen to me when I said stocks were not in a bear market and would make higher highs.
Now here we go again. The dollar is headed down into its 3 year cycle low and no one is listening.
You say everyone is on the US Dollar, which is nonsense. I still hear all the goldbugs saying the USD is toilet paper.
It doesn’t matter that there will be a 3-year cycle low, the Euro can go up all the way to 1.28 and still the USD will be in a bull market. That’s how much the Euro sold off. It will be a false move.
Gary,
In a humble and honest way, I agree with s29. It is not just Martin saying this. The Euro is in big trouble which means a strong US$ rally is coming. Here is a view from another excellent forecaster on US$ – “The US$ remains on track for an overall rally – from cycle lows in early May until late Aug /early Sept 2016 and ultimately into Nov 2016” I know that you don’t value EW, but if you look at an EW chart you can see that the US$ is in a stealth baby bull stage right now. I believe if Trump gets elected plus more negative rates in Europe will lead to a powerful US$ rally. The charts are already telling us this.
I’ll be willing to bet a burrito all these analysts are wrong. The dollar is due for a major 3 year cycle low in the summer of next year.
The decline into that bottom has already begun as it has now made two lower intermediate lows.
Remember: when everyone is thinking the same thing, then no one is thinking.
Everyone thinks the dollar has to go up, but they have forgotten about the trillions and trillions of dollars the Fed printed. There are going to be consequences to that, and it has started already with the double top at 100.
Gary,
We could get the low in the summer of next year as you are saying. However, we could see an explosive run in the $US leading up to that time period. As s29 mentioned, there are big elections next year in France and Germany which could tilt the way of life in Europe and scare off investors. That could be the time when gold really starts its explosive move up and we could have the US$ rallying further up, both in tandem along with the US SM.
Look at that chart again. Two lower lows. The decline has already started. And the cycle is possibly left translated. That is bad news for the dollar. A left translated 3 year cycle should mean big trouble ahead.
In EW terms, as I see it, the US$ index is in a C wave up of an A-B-C corrective move. The May low of 91.88 was wave 4 of C up. Now we are on our 5th and final wave up. If wave 5 up moves near anything like the previous waves I believe we are looking at a move of at least 18 – 28 points up from the May low of 91.88. After this up move then yes the US$ will be in big trouble and the whole world will be in trouble. Perhaps new world currency will be needed. 2018?
I didn’t want to say it but yes I believe gold has one more rendezvous with one more low by 2017 and then the stage will be set for the bull run. Just a friendly discussion. Time will tell where this is all leading.
I don’t say that the EUR/USD can’t go higher in the short term. There will be US election jitters and if Trump gets elected the USD can be in trouble for several months. Once Trump’s policies are outlined, and the European election season start, it will mark a low in the Dollar, and it will rise for years to come. Any uptick in the EUR/USD, whether it will be 1.15, 1.20, 1.26 or whatever, will be a false move to the upside.
Well, the way that I see things is that we are living in a comparable period of the 1920’s where Europe was the problem then as it is now. I would say that this is like 1927 and we have about 2 years to go before everything blows up. But before that happens gold will rise, the world stock markets will rise and the US$ will rise. The world economies will fall apart as these things start to materialize. Then we all will have to face the music.
The US economy can do much better than now because of capital inflows and Trump-businessman policies. It will be the best house in a rather bad neighborhood. But the worst it gets in Europe, Japan and China, the more QE they will do. The more economic growth the US has, the less QE they’ll do and also raise interest rates.
Everything is set up for a higher Dollar longer term.
US dollar strength over time would be at odds with the intermarket setup, especially the commodities.
Question is, how can the various asset markets keep going up with s stronger dollar? Will the Fed allow DXY to get beyond 100 and drag the economy south?
How about global impact on emerging markets of strong dollar?
Food for thought.
The Fed cares about economic growth, employment rate, inflation and a relative stable Western financial system.
They don’t care about capital inflows or USD strength. The capital inflows will back the thesis of a stronger dollar, better economy and a higher stock market.
What bear market? Dollar been trading sideways for months. Looks like consolidation to me. A rate hike in September will kick start the next leg up for DXY.
What’s the deal with energy and commodities? Weak.
Rate hikes lol that perpetual wind bag call has been going on now just north or two years and nothing happens, the last so called rate hike was not even a rate hike, and now they want me to believe ” September is the month ” sure it is, this time were positive you just watch us move…lol The Fed is stuck the last time rates were raised was 2006 nearly 11 years ago….
Rate hikes don’t mean a strong dollar.
This doesn’t say anything. Was the Euro in danger in 2006-2007 ???
Different period, totally not comperable with 2016.
Granted the $USD lost its 200 dma.. however, gold should be up $50+ on that news… ITS NOT… its barely up so what’s holding it back??
Gold was up huge yesterday. It tends to consolidate for a few days after a big move.
I would not call a $5 close up a huge move.
http://stockcharts.com/h-sc/ui
Energy is saying something is wrong here.
Energy is in an intermediate degree profit taking event. Don’t read anything more into it and prepare to buy the dip because oil is going much higher.
Look at the energy stocks. They are screaming that this is just a temporary correction.
Bob Moriarty on Korelin (Who also successfully predicted bottom in gold along with Gary)
Oil bottomed in Feb at $26, topped in late June at $52 and has made a perfectly normal correction. Don’t be surprised with an immediate rally. The difference between supply and demand is a lot smaller than many get. The surprises will be on the long side.
Oil has gone down seven days in a row and few commodity markets make those kind of moves. My opinion is that we are at a bottom.
Share markets trade in a different way than the underlying commodity. All commodity shares that have soared are due a correction.
DXY could do “triple top” close to 100… perhaps ?
Gary — when oil bottoms, are you a buyer of oil company ETFs (leveraged)?
If Oil takes out the Feb lows, can we stop this nonsense 7 year cycle stuff.
Aren’t you tired of being wrong over and over and over?
We heard the same nonsense about biotech. I begged people to listen to me and buy low. No one did.
Now look what they have missed… and this is just beginning.