Look at this weekly chart and what do I see? An asset that’s on the brink.
You have a series of lower highs and lower lows.
The 20-week and 50-week moving averages are rolling over.
The recent bounce was firmly rejected several days ago.
And technical support in the 93-95 area is under assault yet again.
The asset in question? The Dollar Index (DXY). I first started warning in early May about a potentially significant break in the DXY, which tracks the performance of the U.S. dollar against a basket of six foreign currencies. The euro has the heaviest weighting in the index at just under 58%, followed by the Japanese yen, British pound, Canadian dollar, Swedish krona, and Swiss franc.
We saw a temporary bounce after my column came out, one based on what I consider to be misguided optimism on the state of the U.S. economy. But that bounce just failed miserably.
Why? Because we learned a week ago that U.S. job growth stunk up the joint in May. And when you boil it all down, buying the U.S. dollar is a bet on the health of the U.S. economy. If the economy firms up, the dollar should rise. If it rolls over, the dollar should fall.
You know I believe that the U.S. economic cycle is very long in the tooth and that recession risk is rising fast. The bond market certainly agrees with my assessment, given that long-term yields are falling and that the yield curve is collapsing. As a matter of fact, the spread between 2-year Treasury Notes and 10-year Treasury Notes just dropped to 90 basis points (0.9 percentage points) yesterday. That was the lowest since November 2007. The precious metals market agrees, too. I say that because gold and silver surged in early 2016, and they’re now rallying back sharply after a brief correction.
Will the dollar be the next major asset to fall into place — to confirm my recession forecast is on track? Only time will tell. But the contra-dollar and pro-bond investments I’ve been recommending in my Safe Money Report and my All Weather Trader services are performing well. I urge you to give AWT a try by clicking here if you want your piece of the profits.
Another option? Join me on the 2016 Money, Metals, & Mining Cruise! I’ll be sailing aboard the Crystal Serenity with a trio of respected gold and mining experts from July 10-17. The Anchorage-to-Vancouver journey is a great way for you to learn why the dollar, gold, and gold shares are doing what they’re doing — and how you can profit from it all.
With only a month to go, cabins are filling up. So be sure to check out this link for more information as soon as you can. Or give our representatives a call at 800-797-9519 and ask for the Money, Metals, & Mining special rates.
If none of that interests you, just make sure you own some gold and other contra-dollar hedges. That would include things like foreign bond funds or foreign currency ETFs. You can find information on one product line from Guggenheim CurrencyShares here. Then if the dollar does truly break down, be sure to increase your exposure to those kinds of investments in order to profit.
Until next time,