I find this particular chart fascinating. Since the dollar/gold link was completely severed in 1971 we only have two complete cycles, with two tops and 3 identifiable bottoms.

There is an approximate 15 year ‘heartbeat’, with lows coming in approximately 1980, 1995 and 2010. That’s not entirely true though, the exact bottoms came in 1978, 1992 and 2008. So why do I say the cycle is a 15 year one ? Think about how the exact bottom is achieved. There is a ‘period of time’ shown by the red circles in the chart below where the low is expected. It’s a period of 4 years or so, during which, at any point, something will happen in the world of geo-politics and global finance which will cause a spike down. The psychology of market bottoms are very different to tops. Sentiment is rock bottom and there is much reluctance to be overcome. For that reason, major cyclical lows are typically long, drawn out affairs which result in the ‘arc’ or ‘bowl’ patterns. The right-hand side of the arc represents the ‘wall of worry’ we often hear about. Regardless of the EXACT date of the low, the time between the centre of each cyclical low ‘risk period’ is 15 years.

The next ‘risk period’ is 2023 to 2027 (in my humble opinion). That doesn’t tell us which way we’re going in the immediate future – there is still time to go for a ‘moonshot’, with the large ‘bullish’ arc guiding us up to 120, 140, 160 even. That brings me to my next thought – the psychology of market tops. It’s often the case that a stock or a commodity will rise very rapidly into its final multi-decade cyclical peak (look at gold, silver, uranium, copper, oil, crypto-currencies and indeed the Dollar). This results in a sharp (inverted ‘V’-shaped) top. We’ve all heard the term ‘FOMO’ (fear of missing out), and that’s the reverse of what is happening at bottoms.

So, the question is, was 103 the Dollars best shot ? It’s also worth bearing in mind the dynamics of the Dollar Index are very different to any other market, with Dollars (and ‘Euro-Dollars’) etc being held externally, outside of the US and largely outside of its control. The enormous cranking of the printing press increasing the balance sheet exponentially will eventually have major ramifications (exactly what the implications are depends on who you listen to and what your own views are, but I don’t think it’ll be anything good).

Finally, there’s my inverted ‘Dollar Dome’ and the potential diamond top reversal pattern. My conclusion is this…

  • The Major 15 year cycle low is ahead of us, sometime between 2023 and 2027
  • A break below the 94 area will confirm the diamond top and also render the ‘arc’ invalid, targeting MUCH lower (below 70 in my view)
  • A sustained move back above 103 opens up a very bullish scenario which could take the US Dollar Index towards the all-time highs