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HARMONIC ELLIOTT WAVE

Monday, August 8, 2011

Debt, debt, collapsing equity markets and red herrings…

The U.S. has a serious debt problem… Quick! Sell the Dollar… Sell U.S. equities!
The Eurozone has a serious debt problem… Quick! Sell the Euro… Sell European equities!
The whole world has a debt problem… Quick! Sell the world! Sell global equities!

You know something? I’m glad I don’t follow economics… You’ll see in my book that I called for a high in the Dow around about where it stalled and then for a 20% price drop. What’s all the fuss about economics? It’s a great source of employment for economists I suppose…

Having said that, the Dollar has been playing a merry tune recently and it hasn’t been the easiest task working out what’s happening. My core view remains broadly Dollar bearish and it’s the navigation of the individual steps it will follow that is the main challenge. The rallies in GBPUSD and EURUSD on Friday were quite positive in that respect, even the break lower in USDCHF … which wasn’t what I had really wanted at this point, but does adhere to the bearish Dollar cycles. In fact, this is quite a key point as the cycles are literally in the last few months of a 16.5 year cycle… and arguably a 33 year cycle… Just taking the example of USDJPY look what happened in 1978 and 1995… That is what we should be expecting now…

But first things first… We have to navigate the short term. The Dollar definitely seems to have the potential to extend losses. What we have to watch is just how far it corrects higher today to make sure it doesn’t perform one if its recycling tricks… I think not… but just keep that in mind…

Certainly AUDUSD is meeting downside targets now, GBPUSD has pushed up nicely but is in the midst of a correction, the Swissie is rather like USDJPY and very clearly in the final stages of that massive down cycle. USDCAD still seems to have one more leg higher to go but may even see a pullback lower before it can achieve that target back at the 0.9912 high. If nothing else, remember these Dollar bearish cycles are still in force…

Have a profitable week…
Ian Copsey

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