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That seems to be the question that
everyone has been asking themselves for two months now. Analysts have been
trying to pick a top in this market for weeks. All the while I've been
telling, actually begging, people not to sell short. Until the dollar puts in
an intermediate bottom there is just little chance that the stock market is
going to suffer any meaningful correction.
There was the possibility that occurred
in early February as the dollar rallied enough to form a weekly swing.
However that rally quickly failed and rolled over into another left
translated cycle. That gave the market enough impetus to push through the
July and May 2011 highs.
Yesterday the dollar printed a strong
reversal which again has the possibility of marking a daily and intermediate
degree bottom. If it does then we are about to embark on the upside of
another intermediate cycle, and that is one essential event that absolutely
must transpire before the stock market can correct.
 
We will need to wait for a weekly swing
and a penetration of the intermediate downtrend line before we have
confirmation that a major bottom has formed.
If the dollar has indeed formed an
intermediate bottom then gold probably formed an A-wave top yesterday. It did
confirm a left translated and failed daily cycle, which more often than not
means that an intermediate degree decline has begun.
As this is only the ninth week in the
current intermediate cycle, that would imply that
gold should drift generally south for the next 8 to 10 weeks as the B-Wave
decline runs its course.
I expect this will continue to unfold as
a volatile whipsawing nightmare. Welcome to life after a C-wave top.
The unfortunate truth is that as long as
the dollar continues to rally out of its three year cycle low trading
conditions are going to remain difficult.
It's unlikely we will see any sustained
trends until the dollar gets back on the downside of the next intermediate
cycle. Or if this intermediate cycle still has further to decline we may see
a continued grind higher by the stock market. However it is so late in the
intermediate cycle and the markets are so stretched above the 200 day moving
average that it's just not safe to play the long side any further.
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