Brand new US Dollar insights. There are potential implications on M+M.

I want to present some ideas that are not currently accepted by the mainstream EW community and then discuss possible implications IFF these models are accurate.  I want to stress that some pretty smart people do not see it the way I am about to present so I will be picking my way through this model as it unfolds.  The value of this exercise is to not have to wait very late in the game to realize what is going on if things do not appear to be going the way the conventional wisdom told us they would. 

For example, EWI insisted that the DJIA ending diagonal was high probability the peak.  They were wrong and I am guilty of listening to them too closely on that matter.  Yes, I did suspect that the big dip we had earlier looked corrective while the supposed 2nd wave looked motive.  In fact I created this detailed post on the matter.  So the suspicion was there but because EWI was so sure I allowed myself to have doubts about my own observations.

The main observation I want to address now is that of capitulation levels of volume in the miners and also the fact that they cannot profitably mine at today's gold price.  So it really brings into question whether gold can really go down to $750/ozt.  And if gold can't go down there, can the USDX really go much higher?  They seem tightly linked still.  So instead of blindly following someone else, I want to put logic to the facts to see if actionable conclusions result.


First, I want to discuss the very short term.  In this post I provided the UUP (Dollar ETF) model below.  The blue path on UUP corresponds to the blue model in this post on JNUG. This model suggests that UUP Will go higher still before it really turns down.



Below is the high level UUP chart.  Interestingly, EWI believes that wave 5 is already done.  This will be a very cool test of my proprietary wedges=3rds or Cs indicator which is something that I have arrived at absolutely independently of any other sources that I have read.  This does not mean that nobody else ever thought of it but I am pretty good at web searching and I could not find anything from anyone else. 

• IF you know of someone else who has ever put this into writing, please share it in the comments.  

If this working theory gains a large enough body of evidence it has the potential to add significantly to the value of EW counts.  Why?  Because reliable wave position indicators (which I call "key frames" in the wave continuum) are rare as hen's teeth.  The only real one out there in the official rules right now is that triangles are penultimate.  If my new rule can allow me to create better counts than people who have not discovered it them it should give me a significant trading advantage.  I'll be keeping a weather eye on this one.  The next test is right before us.  If this plays out, JNUG is going down to the bottom of the channel and possibly then some.

But wait, there's more.  And this next viewpoint could turn out to be of significance not only because it explains so many open questions about the capitulation selling in M+M of late but also because IFF it plays out like I think it will, it generate charts that are contrary to those expected by some of the smartest pundits of the trading community, again, led by EWI.  The major assumption that I'm questioning is that the dollar will pull back to the prior 4th and then rally big time into a 3rd wave up.

So here is the twist I am adding.  Since 2008 the dollar has been on the slide.  Why?  Because the federal reserve watered down the currency using every corrupt trick in the book including QE.  In early 2011, the dollar bottomed.  Is this ringing any bells?  Yes folks, this is when gold peaked.  Well, that peak was motive, just like the 5 waves in that expanding wedge.

What defines a direction change is when we see two motives back to back but of opposite direction.  So for a bottoming it will be 5 down and then 5 back up.  That's a trend change from bear to bull.

OK so after the direction change which happened in 2011, did we get a motive looking move?  We should have if the trend direction actually changed.  I really don't think so.  In fact, it looks corrective, not motive.  There is a lot of time between the start of what they think was 1 (which I label as red "a") and the end of their 1of 3 (which I label red "c") .  In addition, the wave seems ready to peter out around the 38.2% fib.  Add to that the fact that if the USDX goes significantly higher here then all miners will soon be out of business and it has to make you wonder if this is the peak.

Well, if this is the peak the the gold bear is over as soon as UUP peaks into red C and the dollar is headed down, not up as pretty much everyone expects it to.

In checking out the bigger picture  I again could model a 4th wave triangle having finished and now a clear a-b-c has played out to the level of the prior 4th.

This is a lot to chew on and I am still thinking about all of it.  But I did want it on record that I am not convinced that the recent move up in the dollar was the start of a big new dollar bull.  In fact, I think it will turn into a dollar bear.  Maybe someone will add gold to the USDX basket of currencies soon.  Such a move could produce the expected outcome without requiring the worthless Yen and the worthless Euro to skyrocket so that the dollar can go down.

My bottom line here is that I will not be surprised at all if the USDX keeps falling below the level of the prior 4t, below the 38.2, the 50 and the 61.8.  In fact below the bottom of where this wave begins.

Until now, it seems like the fed has been able to do whatever it wanted to without many repercussions.  Maybe this chart is telling us that something unexpected will happen that changes that.