I was confident that the Fed had already begun printing. That seemed quite evident by the overall action in the commodity markets, the dollar, and the fact that stocks were unable to correct in the normal timing band for a daily cycle low.
As I have been warning investors for many months, stocks have now entered stage III of the secular bear market. Gold on the other hand is now in the final parabolic phase of a two and a half-year C wave advance.
The persistent and mindless bullishness on gold lately has got me nervous. When I get nervous the first thing I do is pull up a multi-year chart and look at the big picture.
When priced in something that has real value and cannot be debased (gold), one can clearly see that stocks have been in a severe bear market since 2000. (If one were to look at PE valuations during the same period they would see the same bear market.)
Make no mistake; the four-day rally we just saw was nothing more than short covering in front of the Fed meeting just in case Bernanke surprised us with QE3. As expected he confirmed that QE2 would end on schedule. The dollar rallied and the market sold off on the news.
Today's FOMC meeting and press conference has the potential to either put in a daily cycle bottom in the dollar index or initiate a waterfall decline into the dollar's three year cycle low. There is a lot riding on this meeting.
