2010

March 14, 2010 · Posted in Weekly Posts · Comment

This has been a boring weak and we can only hope next weak brings more constructive action (through some destructive price action). Equities are about as overbought as can be. The S&P is seeing rising volume in the past three days for little forward price movement - that is a negative sign. The Nasdaq and Russell are at new highs but volume is decreasing also indicating that the rally is fading. What is needed is a healthy pull back to the 100 day MA area to allow for some consolidation. After that, further movement upwards and new highs are available.

The US dollar started breaking down Friday breaking below the symmetric triangle we showed last week. As we stated then, the patterns across multiple markets seemed to be inconsistent but could be resolved by one or more patterns failing. Well, USD pattern failed.

Gold continued weak as the angst over sovereign debt defaults in Europe is dissipating at the moment. That said, we like gold’s chart and think that this may well be the last little flushing out of weak longs before gold turns skyward. A look at the chart below shows that we are in essentially the same configuration we were in back in September just before the breakout. However, wait for the breakout. Gold mining stocks also look slightly weak here. We are primed to buy, but not till we see how they behave in the face of an equity pull back.

Copper and oil also look overbought.

We note that food inflation in India is rising and, depending on which data you hear, is between 17 and 25% per year. China released inflation data last week indicting that their inflation picture is picking up and may surpass 5% later this year. Keep watching the news. We will import inflation into a super-liquidity-lubricated, debt loaded environment. That is like a match to gasoline.

Below are the charts for USD, S&P, Nasdaq, Gold, and HUI: