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Gold – Dow – Dollar

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$ sinking

The dollar is not sinking and will actually rise on geopolitical concerns as the safe harbor in  tempest of conflicting trends. Keep in mind that the majority of people who put themselves out there as analysts only focus domestically. They analyze everything as if all roads lead to Washington. That myopic viewpoint is why they are typically wrong in key events. Most preach the Fed has increased money supply, that is inflationary, buy gold, sell the dollar, Dow and everything else. They ignore the basic concept of what they are preaching against – leverage. When the economy was leveraged just 2:1, an increase in money supply of $3 trillion is still deflationary. Until the money supply exceeds the capital destruction from deleveraging the economy, then deflation rules. This was the criticism of the Fed during the Great Depression – they failed to increase the money supply in proportion to the collapse in leverage. If you ONLY look at one side of the equation, you are going to lose your shirt, pants, and everything else.


Gold will bounce because of the Cyprus event but the Daily Bullish Reversal is 1652. So we have plenty of room for a bounce. Gold has not yet been broken until it elects the 3 Monthly Bearish Reversals. The dollar can rise far beyond what most people suspect largely because the ECB and Germany are doing whatever is possible to destroy the Euro right now. With the German elections, this Cyprus event has Merkel written all over it. She will not bailout Cyprus because of the elections.


The Dow Jones Industrials reached its highest close on the Ides of March (3/15) and the Daily Bearish Reversal lies at 14306 right now. The Weekly level support lies at 13824. At the very least, we need a month-end closing ABOVE 14122 or else we will see a decline back to retest major support at 13010. May should be an important turning point in the Dow. If we extend the rally making new highs then, we will most likely turn down from there perhaps even hard. However, if we back off now, then a May low can be a staging ground for a surge to the upside there after.


The Euro has critical monthly closing support at 12195. Take that out and we then retest the long-term support at 11800 and a monthly closing BELOW that area warns you perhaps better get out of Europe fast.