Best of the Week
Most Popular
1.Stock Market Crash and Recession Indicator Warning: Extreme Danger Ahead - Harry_Dent
2. Is This How World War III Begins, In Almost Complete Silence? - Jeff_Berwick
3.Trump Wins 2nd Presidential Debate, Betfair Betting Markets Odds Bounce - Nadeem_Walayat
4.Why Krugman, Roubini, Rogoff And Buffett Dislike Gold - GoldCore
5.End of SPX Stock Market Correction Nears - Tony_Caldaro
6.Get Ready for the Future - Exponential Machine Intelligence Mega-trend towards Singularity - Nadeem_Walayat
7.US Housing Market Bubble II – It’s Happening Again! - Andy_Sutton
8.FTSE BrExit Stock Market Panic Crash Resolves towards New All Time Highs - Nadeem_Walayat
9.Can Trump Still Win Despite Opinion Polls, Bookmakers and Pundits all Saying Hillary has Won? - Nadeem_Walayat
10.Gold’s, Miners’ Stops Run - Zeal_LLC
Last 7 days
The Stock Market is an Accident Waiting to Happen - 20th Oct 16
It's Rally Time for Gold and Silver Equities - 20th Oct 16
Cashless Society – Risks Posed By The War On Cash - 20th Oct 16
China's Insanely Leveraged Housing Market Will Enter Its Secular Bull Market In 2017 - 20th Oct 16
Donald Trump Bounces Going into 3rd and Final US Presidential Election Debate - 20th Oct 16
Attention Please: Phase Two of the Gold and Silver Train Now leaving the Station. All Aboard? - 19th Oct 16
How to Successfully Trade a Stock Market Crash - Black Monday October 19th 1987 - 19th Oct 16
Tesla, Apple and Uber Push Lithium Prices Even Higher - 18th Oct 16
Silver, Debt, and Deficits – From an Election Year Perspective - 18th Oct 16
UK Property Market: Slow Growth Does Not Equate To Decline - 18th Oct 16
Trump Election Victory is in Your Power - 18th Oct 16
Stock Market More to Come! - 18th Oct 16
This Past Week in Gold and Silver - 17th Oct 16
A Falling Stock Market Cannot Be Allowed - Financial Repression Is Now “In-Play”! - 17th Oct 16
Commodities, Forex and Stock Market Trend Forecasts - 17th Oct 16
Stock Market Crash..or No Crash? - 17th Oct 16
A perspective on risk rally – Risks abound but Stock Market is Confident - 17th Oct 16
Bank of England Blames Brexit for Sterling Drop Inflation, Masks QE Money Printing Cause - 17th Oct 16
From Piety to Pride to Pity, America's Racial Divide - 17th Oct 16
Is Obama Juicing US Government Spending To Get Hillary Clinton Elected? - 16th Oct 16
Seek Your Independence: Anything Else Will Destroy You - 16th Oct 16
SNL - US Presidential Debates, 1st, 2nd, VP - Like You've Never Seen them Before! - 16th Oct 16
End of Economic Growth Sparks Wide Discontent - 16th Oct 16
Donald Trump on Life Support, May Abandon Election Campaign and War on Republican Party - 15th Oct 16
The Gold Manipulators Not Only Will Be Punished, They Have Been Punished - 15th Oct 16
Black Votes Matter - Is the US on the Verge of Mass Race Riots? - 15th Oct 16
Gold Stocks Screaming Buy - 14th Oct 16
Brace Yourself for the Quadrillion-Dollar Reckoning - 14th Oct 16
The Next Recession Will Blow Out the Budget - 14th Oct 16
John Mauldin: My Infrastructure Plan to Save the US Economy - 14th Oct 16
World War III On The Brink: War Will Continue Until It Triggers Economic Collapse - 14th Oct 16
US T-Bill Rejection At Ports In Progress - 14th Oct 16
These 2 Debt Instruments Pose Peril to Millions of Investors - 14th Oct 16
China’s Rocketing Housing Market Real Estate Bubble - 14th Oct 16
DIY Winter Home Maintenance Money Saving 22 Point Checklist to Get Ready for Winter/Fall - 14th Oct 16
US Stock Market, Big Picture View - 13th Oct 16
Stock Buybacks Main Force Driving Bull Market; Rewards Investors and Starves Innovation - 13th Oct 16
SPX Gapping Down... - 13th Oct 16
Syria - Obama Stepped Back From Brink, Will Hillary? - 13th Oct 16
The Structure and Future of Gold in the Investment and Monetary World - 13th Oct 16
Can Trump Still Win Despite Opinion Polls, Bookmakers and Pundits all Saying Hillary has Won? - 12th Oct 16
Gold and Crude Oil - General Stock Market Links - 12th Oct 16
Samsung's Galaxy Battery Just The Tip Of The Iceberg - 12th Oct 16
Hillary: Deceit, Debt, Delusions (Part Two) - 12th Oct 16
Gold and Silver Metals Show Strength Relative to the USD Index - 12th Oct 16
Announcing Trader Education Week -- a Free Event to Help You Learn to Spot Trading Opportunities - 12th Oct 16
Confirmed Stock Market Sell Signals - 11th Oct 16
Hillary Deceit, Debt, Delusions - 11th Oct 16
Trump Support Crashes to New Low of 6.4 on Betfair Odds Betting Market - 11th Oct 16
The World Is Turning Dangerously Insular - 11th Oct 16
An American Tragedy: Trump Won Big - 11th Oct 16

Free Instant Analysis

Free Instant Technical Analysis

Market Oracle FREE Newsletter

LEARN to Trade

US Dollar Bear Market Could Run for Many More Years

Currencies / US Dollar Oct 14, 2007 - 02:27 AM GMT

By: Money_and_Markets


Best Financial Markets Analysis ArticleJack Crooks writes: A rip current can suck even experienced ocean-goers out to sea. So it's no surprise that a weaker swimmer doesn't stand a chance amid such a powerful force.

Right now, the U.S. dollar is in a similar situation. The greenback has been caught up in a sea of fierce selling pressure. All it can do is flail out in the open waters, growing tired and weak. And even news that would normally be positive for the buck doesn't seem able to save it.

In fact, based on the price action I've seen lately, we seem very close to a serious self-feeding downtrend in the buck, sparked by growing conviction among dollar bears …

The Dollar Is Drowning and There's No Lifeguard in Sight!

The last few days have been typical: Every time the dollar has tried to come up for air, it has gotten smacked right back down.

The reason: The powerful and relentless fundamental forces that we've been warning you about:

  • Hundreds of mortgage lenders are hanging by a thread, battered daily by skyrocketing loan defaults and soaring inventories of repossessed homes they can't sell.
  • Home sales have fallen a staggering 22% in six months, to the lowest reading since record keeping began.
  • The manufacturing sector, still the core of our economy, is already in a recession.
  • Retailers are already warning that this could be the worst holiday season in recent memory.

Meanwhile, the Federal Reserve has shown it's going to do everything in its power to pump up the economy. It won't hesitate to cut interest rates again, flood the world with more unbacked paper dollars, and drive the U.S. dollar even lower.

The simple fact is that every new dollar the Fed creates — whether through interest rate cuts or by directly increasing the money supply — inevitably decreases the value and buying power of every other dollar in circulation!

You know this … I know this … and you can bet most everyone else is now starting to realize this, too. Sadly, no one seems ready to jump in and rescue the buck at this point.

How Long Can the Dollar Remain Under Water?

Market players will tell you it's nearly impossible to predict the lifespan of a trend. But that doesn't mean you can't build a general framework for estimating approximately how much longer these trends can continue.

If you go back and pin down all the various U.S. dollar bull and bear markets since the inception of the free-floating currency market back in 1971, you'll find the long-term trends ranged from about five to nine years in duration.

Take a look at this chart of the dollar index and you'll see what I mean …

So where does that leave us today?

By my analysis, the dollar's bear market began at the end of the tech boom in 2002, after a flood of money poured into U.S. assets.

That means the dollar is only drifting into its sixth year of this current bear market — possibly leaving as much as three more years of bearishness left to go!

Now, to get an even better picture of how much longer this bear market in the dollar can go, let's break down the trend piece by piece …

Trends move in stages. These stages are based largely on human emotion and are supported to different extents by underlying economic fundamentals.

For example, if demand for gasoline is rising, and the supply of gasoline is falling, investors will buy gasoline futures. The amount they invest will correlate directly with their confidence in the trend of rising gasoline prices.

The Seven Stages of a Trend
Stage 1:
Unrecognized trend
Stage 2:
Self-reinforcing process
Stage 3:
Successful test
Stage 4:
Growing conviction
Stage 5:
Flaw in perceptions
Stage 6:
Stage 7:
Self-reinforcing process (opposite direction)

Out of the seven stages listed above, I believe the U.S. dollar is now in Stage 4 of its multi-year bear market. In this stage, we see a growing divergence between reality and expectations.

In other words, investors are becoming more confident that the fundamentals bode ill for the dollar, and they are positioning for the greenback's demise. However, they may be starting to commit themselves to a point that exceeds the fundamental weakness.

Let me be clear: There are still very good reasons why it makes sense to be bearish on the dollar, and it would be foolish to fight the powerful current of the dollar bears.

Moreover, we still haven't seen the outlines of stage five — the emergence of real reasons for strength in the dollar.

This is usually a prelude to the self-feeding price decline seen in stage six. That's the point at which even the most ardent bulls finally give in to the trend and we see massive climax selling.

Bottom line: Based on my analysis of the dollar's previous cycles, and the general pattern of market trends, there is still money to be made off of the dollar's decline.

The time to start looking in the other direction will arrive, and when it does, I'll let you know. Until then, the greenback's long-term trend remains solidly down.

Best wishes,

Jack Crooks

This investment news is brought to you by Money and Markets . Money and Markets is a free daily investment newsletter from Martin D. Weiss and Weiss Research analysts offering the latest investing news and financial insights for the stock market, including tips and advice on investing in gold, energy and oil. Dr. Weiss is a leader in the fields of investing, interest rates, financial safety and economic forecasting. To view archives or subscribe, visit .

Money and Markets Archive

© 2005-2016 - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


24 Oct 07, 18:21
Can 2008 be like 2004?

You are saying that bearish dollar could continues for about more 3 Years, but we must see within these 3 Years some correction of about 10000 points.

If we analyze for example EURUSD Monthly Chart, We can see very clearly that EURO it is Overvalued.

So, can we see for example a big correction of about 2000 pips, to 1.25 or 1.24 in the next year, to see then Euro start to raise to 1.60 or even more in 2009/2010.

If we continue to see the Stock Markets with this kind of volatility and the Bear start to grunt, can we see USD as a refugee.

sorry about my English.

Many thanks for your article.

Best wishes from Portugal


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

Catching a Falling Financial Knife