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The signal would be toward inflation. This is crazy talk I know.
The Fed is going to get all austere and end QE. Yes, it must be true;
they said so in yesterday’s delayed expectations management exercise.
This is a flipped over view of the Continuum AKA our monthly view of
long-term interest rates. Maybe the most recent red arrow on the chart
will not result in an inflationary phase this time. But then again, didn’t the Bond King think that it would be different ‘this time’ in spring, 2011? *
What if it is not different this time? I give all due respect to
Prechter because I happen to believe he is due respect. Indeed, I think
EWI are forecasting a top in T bonds as well. So we must realize that
there could be a scenario where T bonds top out and yet deflation
ensues. But if the Continuum is to continue, 2013 could turn out to feature obvious signs of inflationary excess before all is said and done.
* Bond King Bill Gross famously shorted the bond just before it
began a huge rise in a flight to the safety (ha ha ha) to US T bonds.
I've been reading a lot this week about the imminent demise of the US Dollar and how this will propel equities to infinity and beyond over the next few years. As to whether this is right who can say for sure? What can be seen so far this week however is that USD is not showing any immediate signs of weakness. Just the opposite actually.
I mentioned the possibility that USD might break over declining resistance two days ago and that such a break would throw the overall downtrend into doubt. We have seen that break up, and the next target for USD bulls is a higher high over 81.50 on DX. If 81.50 was to break with any confidence then there is a double-bottom target at a test of the 2012 highs: