Doc_Brown wrote:Scotty,
Since this thread got bumped and I happened to look at your charts again, I thought I'd point out a major problem I have with one of them. Your chart of the US$ index stops in mid-2008 and suggests that the dollar was about to hit a major resistance line, with the implication that it would then continue its downward plunge. However, the data since that time very much contradicts that interpretation. In fact, the USD drove right through the resistance line to reach its highest point in nearly three years. This peak was followed soon after by an even higher one. Notice that both peaks correlate well with significant bottoms for the major stock market indices. The dollar index did drop again, but it appears to have bounced off the top of the major resistance line (which now forms a support line). The dollar has recently been making a succession of higher lows and higher highs, and it's recently started moving to the upside with fairly strong momentum. (Interestingly, it's moving essentially inverse to the Euro.)
But that opens us up to an interesting question: Is the deflation that results from a stronger dollar better than the inflation corresponding to a falling dollar? Deflation is great for those that have lots of cash stashed away, but it utterly destroys those that are in debt. Inflation is a major long-term concern for the economic well-being of the citizens, but a fairly moderate level of deflation will further reduce already depressed spending and will increase the value (in terms of "stuff") of the national debt, pushing us one step closer to national bankruptcy.
how very observant of you. That is all true. A major rally was long overdue, as nothing goes down forever.The dollar does seem to have leveled out, at least since the Euro started to show some serious cracks. I think if it was not for the Euro-P.I.G.S., the US dollar may have resumed that downtrend, all-be-it on a higher-downtrend. The would represent the C wave. Of course, charts change all the time, and one can never know for sure when an uptrend/downtrend has been violated. The rule I follow is the rule of 3%. and violations that hits 3, I might wait for 3.07...is a cofirmation of a reversal/possible breakout.
On deflation....I think inflation is much more manageable. Deflation is a nasty bitch, but it does have a track record of 5 years average deflation for every 95 inflation, and usually follows major inflation.
and on the dollar chart, i had to share that one as they have always been hard to find in proper scales.