The purpose of this update is to try to make sure that you remain aware that the dollar has broken down from a giant top area, and is probably headed much lower, a prospect that is not diminished by the modest countertrend rally of the past week or so. We can see this top area and the breakdown last month to advantage on the latest 4-year chart for the dollar index below. With respect to the dollar, Peter Schiff's latest comments on it in Raising Rates Reflect Bigger Debt Not Faster Growth are well worth reading. Basically these people expect to "have their cake and eat it" and have gotten away with this up to now—rising bond market, rising stock market, rates low and stable, thanks to allowing uncontrolled expansion of debt and derivatives, but basically they are out of time, which is what the drop in bond markets and consequent plunge in the stock market is signaling.
The dollar's modest post breakdown rally to the underside of its Broadening Top is a typical post breakdown occurrence, and only increases downside risk by unwinding the earlier oversold condition. With its moving averages in severely bearish alignment it looks set to drop away very soon, and the decline could become precipitous. The reason for this is that a continuation of the current course, where the Fed engages in QT (Quantitative Tightening) and also raises interest rates will quickly implode the debt-wracked economy, so they are likely to abandon the proposed rates rises, unless their intention is actually to crash the markets in order that the Deep State can pin the blame on Trump. Once they abandon the rate rises, the dollar is toast.
On the 6-month chart for the dollar index we see how the dollar rally of the past week or so has unwound the earlier oversold condition and brought it up to the resistance at two trendlines, one being the upper boundary of its recent steep downtrend, and the other being the lower boundary of the Broadening Top shown on the 4-year chart. This is a very good point for it to turn lower again.
To conclude, this looks like an excellent point to short the dollar, which is expected to drop and probably accelerate away to the downside. This should provide a boost for the precious metals sector, which should not be troubled by a falling stock market over the short to medium-term, and even when the stock market does fall again, it should have less or no impact on the precious metals sector, which will increasingly be seen as a safe haven.
Clive Maund has been president of www.clivemaund.com, a successful resource sector website, since its inception in 2003. He has 30 years' experience in technical analysis and has worked for banks, commodity brokers and stockbrokers in the City of London. He holds a Diploma in Technical Analysis from the UK Society of Technical Analysts.
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1) Statements and opinions expressed are the opinions of Clive Maund and not of Streetwise Reports or its officers. Clive Maund is wholly responsible for the validity of the statements. Streetwise Reports was not involved in the content preparation. Clive Maund was not paid by Streetwise Reports LLC for this article. Streetwise Reports was not paid by the author to publish or syndicate this article.
Charts provided by the author.
The above represents the opinion and analysis of Mr Maund, based on data available to him, at the time of writing. Mr. Maund's opinions are his own, and are not a recommendation or an offer to buy or sell securities. Mr. Maund is an independent analyst who receives no compensation of any kind from any groups, individuals or corporations mentioned in his reports. As trading and investing in any financial markets may involve serious risk of loss, Mr. Maund recommends that you consult with a qualified investment advisor, one licensed by appropriate regulatory agencies in your legal jurisdiction and do your own due diligence and research when making any kind of a transaction with financial ramifications. Although a qualified and experienced stockmarket analyst, Clive Maund is not a Registered Securities Advisor. Therefore Mr. Maund's opinions on the market and stocks can only be construed as a solicitation to buy and sell securities when they are subject to the prior approval and endorsement of a Registered Securities Advisor operating in accordance with the appropriate regulations in your area of jurisdiction.