Thursday, November 13, 2008

Dollar Cycle

The rising dollar continues to pressure all asset markets. At times like these it seems like conditions will never change. I guarantee they will though :)

Over the last year investor emotions have been swinging to extremes. Why should now be any different. Last summer oil rallied to heights that convinced everyone that it was different this time. We were never going to see $100 again. However as we know that wasn't quite true.

Right now it seems like the market will never rally again and that the end of the world is near. At some point sentiment will turn and if the last year is any indication it will move just as violently in the opposite direction.

Part of the key is the dollar. We are now moving into the window for the weekly cycle low. The daily cycle is now on day 9. The average duration of the daily cycle is 18 days so we should be getting close to the top. I'm looking for the next swing high as the potential top of this run. At that point the dollar should start to work it's way down into the weekly cycle bottom. Once this process starts I expect it will spark a counter trend rally in all asset markets.