2010

February 7, 2010 · Posted in Weekly Posts · Comment

Hopefully everyone had a good week last week since you were well prepared for the market declines we saw. We do not think we are done by any means though, as that was the 4th week down in a row, we expect this week may see a credible bounce.

Some key points:

1) USD should pull back here or at least trade sideways. It looks poised to break higher towards the end of the month if the present pattern remains intact.

2) Gold is in a consolidation pattern and, if it persists, would be primed to break higher towards the end of the month. This is in apparent conflict with USD. Either USD or gold are going to fail their technical patterns or something is coming that will cause both to rise together. For both to rise together we would need gold rising very strongly in all other currencies such that a dollar rise does not cause a decline in gold’s dollar price. We suggest that a currency crisis or sovereign debt crisis could provide that environment.

3) Equities should bounce but still look weak. Watch the key resistance levels in the market. Friday’s rally occurred when a bear flag on the intra-day chart failed ()just a little) late in the day and the volume ramped up. This looked like short covering to us. Mondays are usually up in recent months so the first part of the week should be up at least.

4) The rest of the key commodities look set to bounce but overall look like they could breakdown towards month end - again in line with the dollar.

5) Many regard Goldman Sachs as a barometer and leading indicator for the market - if so, the market is screwed. Goldman’s chart has just about everything wrong with it there can be. A 15% further decline from here is indicated.

6) Keep in mind that Chinese New Year starts on the 14th so there will be a reduction in news and liquidity for some days as a result.

Below are the charts for: US Dollar, Gold, NYSE Comp, Copper, Crude Oil, and Goldman Sachs. Please read the annotations carefully and study the charts. The overriding picture is one of continued weakness but with the near term likely to see some recovery. The period towards the end of the month looks like it could be quite serious. That said, the market is weak enough that news could push it around.