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May 21, 2009

Happy Happy, Joy Joy

For the second day in a row, equities slumped in the face of a weak dollar, this time precipitously. Meanwhile, early strength in mining shares hinted at a move to come in precious metals, and the rally materialized around mid-day, sending silver up a quarter and escorting gold up sixteen bucks. What more could we ask for? It was a happy day, indeed, for the regulars of The DOCument. Let's peruse a few charts, shall we?

stock index chart

stock market indicator

Of course, this indicator moves quickly, so the lower extreme can be reached in 2-3 days. At that point, I would expect at least a pause in the selling, but not necessarily a serious bounce. I am still targeting the 65DMA on the SPX as a profit-taking point. If price reaches this moving average, I will then look at other indicators to judge whether we get an extension of the mid-term rally to new highs or a weak bounce before a return to new bear market lows.

banking index

Obviously, weakness in financials is ominous for the market as a whole.

dollar index chart

The dollar index will be hard-pressed not to test the next major pivot at 78.50. However, I doubt further dollar weakness will be supportive of equities at this point. Precious metals, on the other hand, are a different story.

silver chart

A positive resolution of the consolidation pattern out of February targets $17+ for silver.

gold chart

Even if the dollar index were to find bids and run higher, I do not think it would derail the precious metals rally. At this point, every major central bank is printing like mad, so the dollar's relative strength to other fiat is inconsequential.

treasury bond chart

Higher interest rates will certainly not be supportive of equities, especially in a depression.

And a few commodities...

copper chart

natural gas price

I will be watching for natural gas to form a basing pattern before attempting a long trades. Similarly, gasoline has doubled out of the December low. Four-dollar gas hurt in good times. What will six-dollar gas feel like in a depression? If the Fed continues its irresponsible policies, we may find out.

See you over the weekend.


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