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    Volatility Reports 12/4/23

    December 3, 2023

December 3, 2023

Volatility Reports 12/4/23

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Gold and the U.S. Dollar Strange bed fellow’s

But a Geo-political crisis is bullish for gold and deflation can co-exist.

To be clear from the start, virtually everyone thinks deflation and economic depression are interchangeable situations. The world did experience both in the 1930s but there are many periods of rapid economic growth with buying power increasing.

For example, “in late nineteenth century United States new technological and policy innovations permitted a vast expansion in the exploitation of America’s abundant natural resources leading to both falling prices and rapid economic growth.” Source University of Michigan, PDF on request.

The featured chart uses a favored technique that pulls time and price together. You don’t have to guess about time cycles, they should jump off the chart for you. Without question there is a variance when the market makes its cycle low or when it crests, but there are methods to work with that.

One thing that stands out about the US Dollar index chart is how it has traded in an orderly fashion within the geometrical grids finding support at the intersections. Like the double bottom at 90 to finish off a long-term flat correction.

What else is worth pointing out is how the dollar has been making big turns when there is a particular astro-event, when Venus is square Pluto. While other astro-technicians are calling it second rate influence with only a S-T impact. From the history of the USD back to the 2011 low which it kicked off, the ranking should be considered a drop-dead serious turning point.

It is rare to have this alignment happen more than once in a year, but it was present for the dollar pull back into late March early April of this year. The USD formed bottoms in those two-time windows. It is cycled 262 days into Monday to act as a timing event. What is key is the market has fallen into this “hard aspect” after weeks of decline from 107 to 103, increasing the chances of a primary low here.

The chart on the right above, has the %BB-VIX on dollar perceived risk. The majority remain bullish on the soft-landing scenario, meaning the cross trade that supports the greenback will not create dollar demand. Contrary Thinker’s %BB-VIX reflects the sentiment behind the dollar. At extreme lows, the world hates the dollar. Which I view as a suggestion the US economy is still stronger than the majority want and blatant opportunity to buy dollars.

The Volatility Reports witnessed panic selling starting near the November 1 high – the end of wave “b.” A price-based factor needed for the low was the panic index (yellow indicator) to be above 70. Couple that with our volatility model going from panic to old and ready for change. The series of volatility extremes (TE#1 to TE#3) in a short period is a high probability pattern that a low is in place.

When you add the timing of four-year sub-cycles (1/16th) making a primary low and a predominate astro-technical event happening in the same time window, Contrary Thinker likes the odds of a renewed rally in the buck.

 

Gold over the long term is the anti-S&P. It is the hedge for traditional long-term portfolios.

Last word in group was “Gold’s narrative is not about a particular currency, it is about geo-political tensions. A move above 2057 should promote a higher ROC. I-T target is 2232/oz”

Gold does what traditionally it was meant to do, be a store of value, a haven in times of geopolitical problems and threats. The 9/11 attack kicked off the biggest bull market in golds history.

It has always been a counterbalance to the stock markets, rarely has it had a positive correlation. So, while it is a well-known fact the stock market does not discount geopolitical treats very well when they happen there is a knee jerk response by stocks. At the risk of sounding morbid, it’s like having a relative terminal ill. Knowing the person will pass sometime, it is still a shock when they do.

The same holds true of stocks. Given its age, the market knows and simply goes about its business until then. But there is the message of gold, and now silver. It is not an inflationary message, given the consensus that inflation has been beaten. Contrary Thinker does not put much weight on inflation being a prime mover for gold, but it’s been ruled out. So, there is something in the wind on the geopolitical front that may be more threatening than the media knows, or it has let on.

Gold is set now to advance for two weeks, ten business days into early December. A COT event is expected on the 25th and we will look at the other elements surrounding them both at that time.

Lastly, monetary inflation against the USD is less of a factor here even after all the decades of the dollar debasement. The USD is a haven as well, as I expect the dollar index to demonstrate going forward.

 

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