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Sunday, July 26, 2009

Long Term US Dollar

Kenny has shown some recent charts of the long term dollar chart. My long term differs a bit as I see an [A][B][C] down from the 2001 peak whereas he sees a 5 wave structure.

So in general we see the same short term moves upward but how far is where we differ. My count supposes that the dollar will actually break above its 2001 high in some kind of 5th wave Cycle (I don't have access to extreme long term counts here) or other such count. He just shows an ABC correction up.

I like my count for several reasons. One, the dual channels seem to spell ABC rather than 1 -5 down. Also [C] is almost .618 times [A]. I also tend to think the dollar low ended in a truncated mess. And his Primary 1 and 2 look very small and out of proportion to the rest of the structure the way it is labeled. For being such a large waveform, I think it is a key point.

However, I do see the [B] wave as an expanded flat. One can almost make a running contracting triangle out of the move, but it doesn't quite count within EW rules.

One other thing I don't think the dollar will necessarily turn exactly when the SPX turns. It is also hard to see when the exact bottoms on the dollar will occur in what I have as a wave (2) low.

I think, more than ever, we should be seeing extreme bearish news on the dollar before a turn back up. So far, I generally don't see the "extreme" media stories proclaiming the dollar's doom. Sure they are there, but I'm looking for more downside. Indeed this last wave [v] move down could challenge very low. But regardless, I do see big move back upwards in a powerful wave (3) rally. It doesn't have to time perfectly with SPX primary 3 down. It could for instance, rally up to a sub wave 1 and then retrace in a 2nd wave sub move just when the SPX is peaking on a P2 top.

Anyways that's my general thoughts on that at the moment.

PS - I don't really pay attention to what EWI has as a $ count. This chart I just made up tonight completely on my own. It seemed easy enough to count and the chart generally took less than 30 minutes to complete.

PSS - There is a great positive divergence on the RSI. So indeed it may turn back up hard soon enough. Its hard to say exactly how the micro waves wil trace over the next month. But make no mistake, I think this chart portends the dollar will make great advances upward contrary to what most people assume.


  1. Excellent work as always! Your analysis kill everyone. Keep it coming :)

  2. So in other words, you continue to see the pace of deflation outrunning any problems the US will have w/financing its deficits? What about all the record bond sales?

  3. In Debt We Trust, yes, I see deflation making a huge inroad, indeed it already is.

    I see some of the debt problems of this country being cured by good ol' fashioned debt destruction which means the dollar should rally hard.

  4. Dan, It seems like $WTIC(Oil) is in now heading higher completing its 5th wave. If this is true then USD can make new lows? USD still in its wave 5(or C) than wave 2 pullback and after finishing its lower move, it moves 5 waves higher.

  5. Dan, If dollar rally hard, is this the last rally?

  6. Eric, beats me. I look for the 2001 highs to be taken out and then we'll see. Obviously that is a long way to go.

  7. Eric, last rally of the dollar? The big question is how long will deflation last...Gary Shilling was on tech ticker two weeks ago saying deflation for many years. Demand destruction will escalate to a spiral deflation level IMO beginning about now. Perhaps another massive stimulus or two will pop us into infltion 12 to 24 months down the road. Dan's EW analysis indictes the market bottom in 2013 +or-. not sure is this will coinside with inflation...end of deflation.



    dano, thoughts???

    I can only vivedly still recall how YOU were the one that was pretty intense over how the $COMP had that EWT violation, hence warning of P2 prior to anyone else....

    and looking back at that, and also looking back at the NDX even more so, i think it could of been seen even EARLIER. The ndx is way ahead of even the comp....

    Like to get your thoughts on this, watch out for it man.....

    thanks for all your hard work.

  10. Thoroughly enjoyed the analysis.

  11. Thanks, excellent post and analysis.

    First time visitor - will be back regularly.

  12. Dan,
    My count is similar to yours and I feel that the Wave 2 will end as perhaps an "expanding flat" and Wave 3 would should be at least 2.618 times of Wave 1 ($71 to $89)...