Ramblings on the Stock Market, Gold, and the US Dollar

Let's try a little different approach to try and figure out where the Stock Market is headed. Most so called experts use the S&P500 Chart instead of the DOW, but since the charts look almost identical we'll stick with the Dow for now. Since the DOW and the US Dollar index are inversely correlated, I took the DOW chart and divided it by the USD index. Have you ever noticed when the Dollar is strong the market is down and the exact applies? The same thing could be said for Gold, Silver, and Oil versus the USD. Now with that said...Wouldn't it be nice if we had a stable currency, but I guess that would be asking too much. A currency backed by Gold or Silver would provide a stable currency and inflation/deflation would be very easy to predict. You wouldn't have these boom and bust bubble-a-thons that always teeter on mass inflation and a deflationary spiral. Just for the record. I asked 10 people what the dollar was backed by and 9 out of 10 said Gold. Really people! The Gold window was closed in 1971. The US dollar is a debt instrument and is backed by notes and bonds. Since 1913, the dollars has lost 96% of it's purchasing power. I will lay this out plain and simple for all you Gold doubters

out there. The price of Gold was $20.00 an ounce. You could buy a complete suit, tie, and shoes for 20 dollars or one ounce of Gold. What does 20 dollars get you today? A cheap tie from a discount store. What does one ounce of Gold buy you today? A complete suit, tie, and shoes. I could apply this same logic to a house or car. It doesn't matter. The price of Gold hasn't changed in over 100 years! What has changed is the value of the dollar! Like I said it has lost over 96% of it's purchasing power. O.K.....enough of that. Let's get back to the charts.

By taking a glance at the DOW versus the dollar chart, we can see a clear head and shoulder formation on the chart. What does this tell us......It appears the stock market will have a correction downward and the dollar will strengthen. SPECIAL NOTE - The Fed is meeting to decide if they should devalue the dollar. This could trigger a decoupling event between the Stock Market and the Dollar. Yes, this would include Gold, Silver, and Oil.