Elliott Wave Dollar Rally Could Lead To Stock & Commodity Crash

Posted by Bigtrends on May 12, 2011 2:11 PM

Transition Complete

Courtesy of Toby Connor, Goldscents

Despite my bias to see new all time lows in the dollar index, I think the dollar (UUP) probably put in the three-year cycle low last week. Sentiment at the time had reached multi-year lows and as of yesterday the dollar had moved back above the 50 day moving average.

If I'm right then this should usher in the next deflationary period just like the rally out of the `08 three year cycle low signaled a coming recession, the next leg down for stocks (SPX) (SPY) in the ongoing secular bear market, and a collapse of the CRB (GCC) into its 3 year cycle low.

Dollar Index & SPX Weekly Chart

This should also drive gold (GLD) down into its D-wave decline. Yesterday the miners (GDX) made a lower low and this morning silver (SLV) made a lower low. It's probably only a matter of time before gold breaks below the $1462 pivot. That would confirm that gold is now in an intermediate decline and this late in the C-wave that would almost certainly turn out to be a D-wave correction.

Dollar Index & Gold Daily Chart

The good news is that sometime in late June or early July we are going to get the single best buying opportunity we will ever get for the rest of this bull market.

At this point the goal is to preserve capital and get to that major D-wave bottom with plenty of dry powder.

Courtesy of Toby Connor, Goldscents