Many times what "should" happen does not happen. For example, global stock markets "should" decline as the global economy free-falls into recession, as global recession is not exactly an ideal scenario for rising corporate sales and profits or demand for commodities.
Yet global markets are by and large rising significantly.
Sometimes what "should" happen is simply being delayed. In other cases, some other dynamic is at work. Stock market bulls, for example, say the "other dynamic" is global money-printing by central banks, and this "easing" will power stocks higher even as sales and profits sag.
Analysts who believe fundamentals eventually over-ride monetary manipulation believe the stock market decline has only been delayed, not banished.
A similar tug-of-war is playing out between those who feel the U.S. dollar "should" decline in the years ahead and those who see the dollar strengthening significantly.
Those who feel the dollar should decline look at the Federal Reserve's money-creation operations (buying $85 billion a month of mortgages and Treasury bonds) and see money expansion that devalues the existing base of dollars. Thus they feel the dollar "should" decline, and any rise in the dollar versus other currencies, oil and gold are temporary.
Those on the other side are dollar bulls, of which I am one; I have consistently been presenting the case for a stronger dollar since early 2011. We see other dynamics in play that "should" push the dollar much, much higher.
The technical case is encapsulated in this chart, courtesy of our Chartist Friend from Pittsburgh :
This is not to say that we don't believe expansion of base money is not dollar-negative; clearly, expanding money while the real economy of goods and