The dollar has been displaying tremendous relative strength as it has rallied for the past 45 days. This is contrary to our cyclical expectation for an impending 3 year dollar decline. A possible explanation could be that the dollar has already printed a stealth 3 year cycle low.
The dollar formed a failed yearly cycle in May. Our expectation was to see the dollar tag the declining monthly trend line and then continue into its 3 year cycle decline.
Instead the dollar is breaking above the declining monthly trend line. This aligns with what we see with the monthly cycle bands. Cycle band theory tells us that a close above the upper cycle band indicates that a cycle low of a higher order has been left behind. In other words, a close above the upper monthly cycle band would signal that May printed an early 3 year cycle low.
I would like to remind you that no one thought that the dollar printed a 3 year low back in May 2014. I did not have the cycle band tool back in 2014, but as we can now see the close above the upper monthly cycle band confirmed the new 3 year cycle.
There is a concern that a May, 2016 three year low would have only been 24 months.
36 Months – 1978 – 1981
28 Months – 1981 – 1984
45 Months – 1984 – 1987
38 Months – 1987 – 1991
19 Months – 1991 – 1992
30 Months – 1992 – 1995
41 Months – 1995 – 1998
45 Months – 1998 – 2002
29 Months – 2002 – 2004
39 Months – 2004 – 2008
38 Months – 2008 – 2011
36 months – 2011 – 2014
24 Months – 2014 – 2016 ???
Twelve 3 year cycles stretching from 1978 – 2014
424 months/12 = 35.33 months
The average 3 year cycle low prints every 35.33 months. However there has been one yearly cycle that ran 29 months and another lasting only 19 months. So it is certainly possible that May hosted the 3 year cycle low. A close above the upper monthly cycle band will confirm the new 3 year cycle.
This is just the beginning of the discussion. In the Special Dollar Report: Stealth Low, we will look that the ramifications if May actually hosted the dollar’s 3 year low. I will break down what this means for the dollar’s 15 year super cycle. And then tie this in with what happened to gold the last time this occurred.
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