correction happening... watch for GLD entry

On last Friday, we witnessed that when the USD rallied, the SPY tanked, but when the USD fell, the SPY just held flat and did not rally. Hmm maybe people are starting to realize that a USD in free fall may not be all that positive for the economy. But anyways in the short term, the USD does appear to be heading higher.

In each of the three chart above, there is a red horizontal line which represents either a major support or resistance point, and is also where the 50 DMA is situated as of Friday. The markets will most likely head lower until at least that point with the USD rallying, as the market is very jittery right now. I have my doubts that we would see another huge shakeout as what has happened earlier in the month, with the markets rallying to new highs, but we must always be open to that idea. Anyways if it is true that we are in the middle of a correction, the red horizontal line might be an area where one might want to load up on gold (95-96 on GLD) and anything precious metals related if there are signs of stabilization around that area. I see GLD holding up well whatever happens to the economy, eg as inflation hedge, or as a "safe-haven" asset.

You might also be able to say that you want to load up on stocks when the SPY stabilizes around 101.6, with that being a healthy correction from current levels. But I'm a skeptic about our current economy, and who knows if a healthy correction will turn into a full blown vicious bear market. With people losing their jobs, company beating earnings by cutting expenses, I have my doubts, and the stock market is basically saying right now that there won't be any problems in the economy. If this expectation does not turn into reality, you will witness stocks being re-priced appropriately.

the week ahead

When people say with certainty that "this will happen", gold will goto X, the SPY will goto Y, they really are just guessing just like everyone else. I can say what is likely going to happen, but what is likely going to happen, does not mean it is going to happen, and once again we have to be flexible with our oppinions.

Anyways, the SPY appears to be building a little bit of a bull flag ( light blue markings), and this would support the continuation of the rally, after all fund managers have got a lot of window dressing to do to prop up their fund values, not to mention the plunge protection team doing their magic. The second piece of evidence of continued rally, is that the US dollar seems to be hitting quite a bit of resistance (see the UUP chart). Although we have to be careful because the gov't is selling more treasuries this week, and will try their best to prop up the dollar.

As for gold, it appears to be sitting on support (with the dollar sitting at resistance). So overall things look bullish for the week, although we must be vigilant for any violent turnarounds, cuz we are in a very overbought market now.

rally on except for USD

Well after a brief correction on gold and silver, last Friday, gold, silver (and even the SPY) formed a new high, and so we have a series of higher lows and higher highs. This would seem to support the thesis of a continued rally for gold, silver, miners, and as much as I hate to admit, the SPY. For sometime now, the performance of the market seems to be inversely proportional to the USD, and it seems like the USD is breaking a support.

But again caution is warranted. The USD could easily rally to the upper descending trendline, thus causing a nerve racking correction. Could it happen? Anything can happen. Will it happen? Who knows, it depends what the PPT and big money decide to do, but so far it seems to be reasonable to expect "THEM" to sacrifice the USD for continued rally in the markets. Futures are down Sunday nite. We'll see what happens tommorow.

USD at short term support?

For the last little while, the markets rally when the USD gets crushed and vice versa. Today the USD got absolutely crushed, and likewise the market rallied. But for the USD to suffer such a massive decline, with oil rallying and gold rallying, the performance of the SPY was relatively unimpressive. Furthermore, volume on the SPY is one of the lightest this year.

Taking a look at the UUP, it looks like the UUP is trading around the lower trendline (red) support. If the dollar does rally off of this lower trendline, then it will likely mean some sort of correction in the stock markets given the inverse relationship of the markets versus the dollar. Keep also in mind that gold has kissed the $1k mark, and the markets have gapped up to another major resistance point.

Chances are that we're more likely to see a correction (in everything) than continued upside at least for the short term, if the dollar rallies so being defensive would be prudent.

shakeouts, fakeouts, and pukeouts

Tommorow is the jobs numbers coming out of the US. What number this is doesn't particularly matter. What only matters is the market's reaction to the numbers. So what's gonna happen? From the short term time frame, it does appear that the markets are correcting with a series of lower highs and lower lows. On a longer term time frame, we had a huge run up on the SPY, and based only on technical analysis 120 on the SPY does not seem unreasonable. Based on fundamentals, the SPY should be trading in the toilet, but it appears that fundamentals don't particularly matter anymore. We'll see what happens... Wall St. media is hyping about how September is a month likely to produce losses based on history. Do you think the big boys will allow that to happen? Really it does not really matter to the big boys as long as they make money. And it doesn't matter to the government either as long as people are happy, which usually means higher stock prices... so does this mean the Crash will come when everyone least expects it? Probably, and based on contrarian views, it would not surprise me that stocks rally for the month of September. But I won't bet one way or the other. My note is just to preach caution and risk management.

Well gold has finally broken out of their symmetrical triangle to the upside, and approaching $1000. I do firmly believe that gold should be valued higher based on fundamentals. But like anything, just a word of caution... everyone expects gold to break the symmetrical triangle, and then to break $1000 to the upside. Do you think the big boys will allow this to happen? Or do you think they will create one last final shakeout to wipe out hope? For those who are in a strong hand where they are having big profits from holding gold, then they can afford to stay long, and they have more time to react to any sudden reversals that might develop. For those who have a weak hand, any sudden reversal will wipe out profits, and possibly lead to losses. The point is to limit losses with disciplined stops, but for now, it does look like gold is finally getting the respect it deserves.

Anyways support/resistance levels are illustrated in the chart, and it would be prudent to take some profits at resistance, and to raise stops to support.