Gold/Silver: Dollar direction and a small-cap hedge

As we pivot into August and phase transition from the booming reflationary recovery to stagflation, we at Blue Line Futures will shift our focus targeting more tactical plays before heading into Jackson Hole on August 26-28. As an individual investor, it is crucial to focus on basic strategies that are simple and effective given the current economic backdrop. For instance, in a stagflation environment, we will want to continue to sell small-caps (Russell 2000) on rallies, buy Gold on corrections, target specific undervalued Commodities, and pay strict attention to the Dollar.

How much juice is left in the Dollar? Now I know what you all will say "the Dollar is worthless," but let's keep focus and look for opportunities to make more of these worthless dollars and convert them into things that can potentially store value. Technically, although rising from early June into the latter half of July, the Dollar Index has failed for the sixth time, signaling lower lows, and appears poised to retest 90. The critical breakdown will cause another run on the so-called "transitory" inflation and boost commodities. Let us look at the two charts below.

Daily Dollar Index Chart