2009

May 31, 2009 · Posted in Weekly Posts · Comment

We are seeing a confluence of forces in world markets that point to a significant next leg rally in US and world markets coupled with a rise in precious metals, commodities and their producers while the US dollar continues its fall. Specifically, we think that the US equity markets have just about completed their consolidation and will start breaking out this week into new high territory. We believe that the precious metals are definitely bound much higher taking their miners with them and we believe that base metals are about to break higher as well.

We will look at the US markets followed by Australia, Brazil and China after we first look at the US dollar. As can be seen it is coming towards a retest of the December lows. We expect it will break through though one could expect some minor resistance.

US Dollar 05/29/2009

Looking in turn at the NYSE composite, the Nasdaq composite and the S&P we see three measures of US stock market health all of which show a period of consolidation beginning to end. Specifically, the NYSE appears to have completed an ascending triangle which would complete with a breakout to the upside. The rally late Friday was likely short covering but we expect short covering by those who are coming to realize that this market is going higher soon.

NYSE 05/29/2009

NASDAQ 05/29/2009

SPX 05/29/2009

All-in-all we think the body of evidence points to a breakout to the upside as the final shorts capitulate and the money on the sidelines in the pension funds and hedge funds which has been sitting this rally out finally capitulate as well and enter.

Looking at the overseas markets Australia, Brazil and China in turn we see that Australia appears to be forming a nice base, Brazil may come back a little here but has still looks strong and China is just motoring on up holding the trend line after the most recent correction. In other words we d not see any portents of doom in these charts. We see instead - opportunity.

Australia 05/29/2009

Bovespa 05/29/2009

Shanghai 05/27/2009 (They had a Holiday hence no 05/29/2009)

As we have been saying the US dollar is going to enter crisis mode and that, together with rising interest rates will derail this rally, at least in the US. However, we are first going to see a further leg upwards while the dollar picture darkens. This is typical. The force that leads to major market drops is generally ignored for some time until the pressure gets too great and then a sell-off or market turn occurs. We believe the same thing is happening this time.

How are we positioning ourselves to take advantage of these forces? Read our strategic portfolio and find out.!

The Strategic Portfolio is how we are investing in the global trend of dollar depreciation and Asian recovery and trading around that trend to ensure we stay profitable. Take advantage of the Free Two Week Trial and read it. We have also update the scorecard for today’s action.

The Strategic Portfolio

Portfolio Scorecard 05/29/2009

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The following additional posts are highly relevant:

The Strategic Portfolio

The Most Important Question Facing Investors

How the US Dollar Will Lose Reserve Status

Chinese Gold British Debt

Brazil

China Part 4 - Playing the Dragon

China Part 3 Global Hard Assets

China: Part 2 - Bonds, Dollars, and Inflation”.

“The Fed and The Bond Market - Will Intervention be Effective?”

“The Coming Bond Debacle”

Fundamental Trends