Point of Critical Mass in Dollar
9/10/14 Weekly Re-Lay Alert: In politics, in geopolitics, in earth disturbances, in the markets… and in almost every aspect of life – there is a way of describing when enough synergy has been attained in order to prompt a change, or a reversal.
It is best known as the ‘Point of Critical Mass’.
As it sounds, that is the point at which enough ‘mass’ – in whatever form or connotation that takes – converges to ‘tip the scales’ in another direction…The same is undeniably true in the markets – and is the reason that technicals and cycles are SO important.
A major change could be in the works for months or years, even though the underlying market action does NOT yet reflect it. It is only when that change – in the form of many smaller and some very subtle changes – reaches the Point of Critical Mass that an abrupt and often violent reversal occurs.
I sometimes cite the interest rate and stock markets of 1986–1987 as a related example…From 1982–1986, the two markets moved higher in tandem. Beginning in early-1986, Bonds began to consolidate and then correct (interest rates edging higher), even as Stock Indices continued higher. No ‘critical mass’ yet.
As 1987 unfolded, Bonds underwent a more serious decline – even as the Indices surged into late-August. Still, not quite critical mass.
In September, Bonds accelerated lower and the Indices began to take notice… critical mass nearing. For about 7 weeks, Stock Indices vacillated near their highs – without adding to their gains – even as Bonds moved lower (and interest rates moved higher).
And then, in one fell swoop, the Indices corrected a year’s worth of gains – dropping precisely to a pivotal low from 1986 – their ‘4th wave of lesser degree’ – in a couple days’ time. (And, Bonds surged in a reactive flight to quality, recouping much of their losses from the previous 12 months.)
Interest rates had been heading higher for 18 months. BUT, the Point of Critical Mass was not reached until they had almost completed that ascent…
A similar scenario – I believe – is currently unfolding in the US Dollar. The announcements & revelations are steadily gaining momentum – each of which point to the same objective of displacing the Dollar as the global reserve currency.
However, the Point of Critical Mass is not expected to be attained until 2015…On a related basis, all the international turmoil is ‘spooking’ the stock market but has not done any long-lasting damage. That, too, must reach the Point of Critical Mass before investors will race for the exits. That period could begin in… [see 9/10/14 Weekly Re-Lay Alert for complete details].