The Arguments for Reflation and Deflation: A Look at the Dollar, Gold, Uranium and Oil

At around the beginning of the year, I identified three fundamental “narratives” that would govern the general outlook of the market:

  1. That deflationary forces could prevail at any moment. This was the most bearish outlook, and it meant that one would chronically want to look for a major top at any moment.
  2. That the markets would price in reflation—but falsely so—for quite some time (months or more). This was a “let’s play along for awhile” outlook, and it meant that one would allow the market to act like it was going to come out of this whole mess in one piece, but knowing that the first option above would eventually take over.
  3. That somehow they actually did throw enough money (or “reserves” even, if you like) at the system that somehow we would enter a period of genuine growth. This was the most bullish outlook, and it meant that we were actually in the early stages of a multi-year bull market.

Last year I had been insisting on the first, but eventually I learned my lesson and accepted that either of the two other alternatives had some real grit. I have been toying with those latter two options ever since, letting those govern my general counts, and it’s been lovely. But, I think 3 is very unlikely now and I think 2 has probably played itself out, leaving us left with number 1.

What I want to do in this article is show how reflation versus deflation could manifest itself on the charts of the dollar, gold, uranium and oil.

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$CCJ May Need to Correct Its Advance

After correctly calling for the pop on $CCJ on August 25th here, I would like to consider its next moves. We can see at a glance that it’s made a 5-wave advance. If that’s “wave one” of a new bullish cycle complete, then we would expect a 3-wave correction to the 50-61.8% retracement of the move from the March 2020 lows. That would get us to the orange box. However, it wouldn’t be a very vigorous retest of the giant wedge its just broken out (I will show you that in the second chart), so it’s also possible that it corrects the move all the way down to the 78.6% retracement, also common (but less common) for wave twos. I have noted that with the orange line, and it’s interaction with the wedge would take us out fairly far in time.

CCJ

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Note: When my work is first published on this website, it is made available to patrons who support my work through my Patreon account. Over time (usually after a period of a few months), I make the work public. To gain access to my work when it is produced, please consider becoming a patron. More information may be found on my About page and on my Patreon page.