US dollar in plan, served by the gold / silver ratio

The US dollar (DXY) has activated its inverted H&S, gold / silver maintains its uptrend, watch the advance of silver …

I don’t make predictions because I don’t pretend to be a guru. * But NFTRH has been tracking what has been an uptrend in the US dollar throughout 2021, keeping us abreast of the potentials that are materializing from late summer through fall. A higher low was made in May and now a higher high, completing an inverted head and shoulders pattern that we have been projecting since the USD placed the theoretical right shoulder last spring.

Until recently it was a projection. It is now active after testing the cleavage (dotted), maintaining the 50-day average (blue) and reaching a new high for the cycle. Simple, without predictions but with a lot of attention and respect for the process.

You can see the three targets we have set for the world reserve currency, which has logically caused market tensions as of late. It is as simple as’ you live (pump markets) by devaluing the currency, you die (markets correct) when it rebels. Now if the rebellion does not turn out to be anything more than moderate and should end at target # 1, we will probably revert to our regularly scheduled programming of widespread inflation problems in the macro.

As you can see, the three targets are Fibonacci retracement levels. Everything is doable depending on how aggressively risk is triggered and man and machine seek liquidity (as opposed to market speculation) in the short term. It is noteworthy that the pattern itself has a theoretical measured target of 97. Again, it is not a prediction, but now that the pattern is active it is a viable target.

US dollar (dxy)

And speaking of liquidity, the problem is compounded when fellow USD Rider (from the Apocalypse) travels alongside.

Dollar

The Gold / Silver Ratio (GSR) has had an uptrend of its own in 2021. When they travel together, the implication is a weakening of the liquidity of the markets. The rallies kicked in as we forecast a cooling in inflation trading in the spring and they persist so far. Silver has more cyclical and inflation sensitive characteristics than gold and therefore the interaction between the two is an early warning system about the future state of the macro from an inflationary / deflationary point of view and all points intermediate (hello Goldilocks).

The increase in gold / silver means market liquidity pressure. The rise in silver / gold means a cyclical increase in inflationary pressure. The process has been in play for months and may be culminating, with the next phase of inflation set to begin. stagflationary morph. But until the USD and GSR abort their uptrends, the global macro will not be out of the woods.

It’s a classic game, here in spooky season (September to October-November) to watch the herds spread out due to cash loss fears. But then there is what follows, and it will not be what the herds think in the short term. They will be too busy doing what they think is right, which is running for safety; running for liquidity; running for US dollars (the better part of a year after the rally actually started)! But the pack is the pack for a reason, huh?

As a clue, look at the silver. We have our targets on the downside amid what is becoming a positive backdrop of counter sentiment (and CoT) for gold’s wild little brother. Nothing is predictable, but it sure is manageable and so far that management is guiding us correctly. Even the Fed is playing ball in its freshly donned hawk suit. At crucial times in the markets, it pays to observe your assumptions and think ahead. For example, in regards to the Fed (and Yellen in the sidecar) …

* Many people pose as gurus, but in reality there is no such thing. There are hard and straightforward workers and there are big marketing machines (cough, cough, Casey… cough, cough, Dent… cough, cough, Stansberry… cough, cough, a host of others…).

Check back for my next post!

Better,
Gary Tanashian

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