USD Scenarios 1 and 2
Excerpted from the February 28th edition of Notes From the Rabbit Hole.
I want to update the USD 'scenarios' first introduced in NFTRH21. We will be keeping a close watch on these proceedings going forward because they are vital to effective analysis, with respect to the timing of deflation-inflation dynamics and our stance.
Scenario #2 fits best with the [short term Gold-Silver ratio technicals noted previously in today's report], as everything else declines short term. But here is the up to the minute status of the would-be ascending triangle of scenario #1.
Why a 'would-be' ascending triangle? Because, while the top line has now been fulfilled with two reaction highs, to qualify as an ascending triangle, the USD exchange value should decline for another bang on the lower (ascending) line. This would lock and load scenario #1.
If the dollar follows scenario #2 and breaks out here, from over bought levels and bearish divergence, it will negate a healthy ascending triangle and blow off into a less sustainable rise, which would likely top out per the weekly chart.
The implication of scenario #2 is short term pain to most asset holders in a final liquidation, and then preparation for a long inflation cycle (dollar decline). Scenario #1 however, would be the real nightmare scenario, where the dollar declines now, sucks in the casino patrons for a play at the bull game and then rises in a stronger and longer fashion than most would anticipate.
Despite a short term decline, #1 is the most bullish USD scenario where Uncle Buck hits the lower line around the SMA 200 and then rises once again for a try at upside resistance at the top line. The intermediate term measured target off this would be the high 90's, specifically, 98.
We might extrapolate a bit and define #1 as the gateway to deflationary depression and #2 as the introduction to the next inflation cycle which itself could be a gateway to the Austrians' Crack Up Boom.
Neither scenario will contain many positives for most people, but they will surely require very different actions by people interested in surviving financially.
Requisite actions (and non-actions) continue to be defined and refined in NFTRH22 and future editions.