Stock Market Is Readying for a Breather

Warren Buffett, the GOAT is Retiring

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Today we will be covering...

  • Today, we will examine the US Dollar.

  • Buffett said at the annual meeting: "THERE COULD BE THINGS THAT WOULD HAPPEN IN the US THAT WOULD MAKE US WANT TO OWN A LOT OF OTHER CURRENCIES."

US Dollar – Sentiment & Price Projections

  • From the chart below, non-commercial traders are on the same page with Buffett, as they are net short USD.

  • By comparing this chart with the US Dollar Index (DXY) chart below, on which I marked bullish and bearish USD exposures of non-commercials by blue and red ovals, respectively.

  • One can see that non-commercial traders are essentially trend followers, which is not bad, but are often wrong (overly exposed) at extremes, i.e., trend reversals.

  • Buffett may have a longer-term view than non-commercial traders.

  • In the past, we discussed some USD longer-term issues, such as de-dollarization, unsustainable debt, money printing, etc. Maybe Buffett is seeing these and something else, perhaps.

  • However, I am unsure which of the major fiat currencies will have better long-term potential than the USD. 

  • I am not sure anyone can predict that accurately, because this may be affected by random things in the future, like changes in governments or their policies.

  • Therefore 

  • As reported in the Pro newsletter several weeks ago, the US Dollar Index, DXY, satisfied the 4Y cycle down target, but has much more downside potential within the target range.

  • DXY is bouncing from that 4Y cycle target and has a 20D cycle target of 100.5-100.86, shown below.

  • Even a slight uptick this week will also generate a 40D cycle price target extending to about 102.

  • We will examine some of the most important USD currency pairs in the Pro newsletter.

Sentiment & Technical Analysis

  • The CNN’s Fear & Greed Index finally got into Greed.

  • We would like to see it in Extreme Grid before the next bigger swing down in the stock market.

  • We do the state-of-the-art scientific cycle analysis of financial instruments.

  • The chart below shows estimates of the 10-week NDX cycle using the two methods we use: 1) Fourier transform analysis, and 2) our proprietary cycle detection using Wavelets. Although there are some subtle differences, they are beyond the scope of this report. They generally provide similar cycle detection performance.

  • The 10W cycle is expected to peak soon. The 5W (not shown) cycle is also peaking.

  • The down phases of these two cycles could provide at least a breather in the stock market advance.

  • There are longer cycles, such as 20W and 40W, that are still pointing higher into summer, as elaborated in the Pro newsletter recently.

BraVoCycles on X

  • Consider following me on X (former Twitter) in addition to the newsletter, as I often post valuable information there in real time between the newsletters.

    • Warren Buffett appears to be bearish on the US Dollar. 

    • As we reported before, his Berkshire Hathaway holds a record amount of cash, almost $350 billion.

  • Many expect bond yields to continue going up.

  • But 10-year T-Notes cycles and seasonality suggest T-Notes should be up in the next several months, and, correspondingly, the yields should pull back.

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