MAJOR CYCLE BOTTOM IN GOLD AND COMMODITIES


The following article is a reproduction of the weekend report published on June 2 for premium newsletter subscribers.

Stocks:
With Friday’s employment report a few things began to clear up. The first one is the correct cycle count on the stock market. With the break to new lows it’s now apparent that April 10th formed either a very stretched, or very short daily cycle. I tend to lean towards the very short cycle interpretation based on the trend line breaks I have illustrated in the chart below.

buying on weakness data print on the SPY ETF. Then once a swing forms it should mark the bottom of this intermediate cycle.


The second scenario would play out if inflation surges high enough and quickly enough to topple the already weak global economy. In that scenario the stock market would move to marginal new highs, allowing smart money to offload positions to dumb money buying into the breakout. What would follow would almost certainly be a 1 1/2 to 2 1/2 year grinding bear market as the slowly deteriorating fundamentals fight ever larger infusions of liquidity from global central banks. Unfortunately liquidity is exactly what would be driving commodity inflation so central banks would actually be making the problem worse rather than better.

Dollar:

An intermediate bottom in stocks (and commodities) should also correspond with an intermediate top in the dollar. I suspect the reversal on Friday’s employment report is going to mark not only a daily cycle top, but probably an intermediate, and possibly even a three year cycle top on the dollar index.


Chart courtesy of sentimentrader.com


So conditions are now in place for major reversals in stocks, commodities, precious metals (already bottomed), and the dollar.

Gold:

I think it’s safe to say that Friday’s action took the short cycle scenario off the table (as well as the D-Wave continuation). Gold not only broke its intermediate trend line, but also formed a weekly swing. I think we have all the confirmation we need at this point to conclude that gold’s intermediate cycle bottomed two weeks ago. (My previous post dated May 17 correctly called gold’s bottom within a single day).

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