Commodity, Currency, Gold, and Equity Market Analysis by Dr. Christian Normann        Please note: the optimal screen resolution for this page is 1600 x 1200 (UXGA Info) or 1920 x 1080 (1080p Info).  If your screen resolution cannot be adjusted to at least 1600 pixels wide through your operating system display settings, you may need to scroll a bit to the right in order to see the most recent chart action.  We apologize for any inconvenience, but believe it is outweighed by the ability to clearly see - in a single chart - several years of market history and important long-term support/resistance levels (that can significantly affect traders in all time-frames). Please visit the About Normann Financial page for important information about risk management and position sizing.  We provide analysis to the best of our ability, but proper risk management is crucial.  Your trading and investment decisions are exclusively your own responsibility. Weekly Market Analysis Based on Closing Prices, Friday March 6th 2009 Introductory Summary: U.S. and World equity markets are in multi-year downtrends, and have entered another wave down which will likely go significantly below the 2002 lows before the start of the next multi-month counter-trend rally.  Plausible target range for the next intermediate bottom for the S&P 500 is 620-580 and 5900-5500 for the Dow Jones Industrial Average, after which a major rally of 30+ percent to around S&P 800 would be quite likely.  Certain terribly beaten up stocks are likely to have major rallies of 50-100% or more during such a rally.  We'll show charts with suggested entry and stop-loss points for stocks and ETFs like DRYS, FSLR, RIG, XLE, XME, SLX, FCG, and TAN when it appears the equity markets are close to a bottom. Crude oil could be bottoming.  However, if the $40-$37 support gives way in convincing fashion, the next important area of support is all the way down at $26-$25.  Conversely, if oil breaks $56 on the upside, the bottom may well be in. Gold appears to be in a correction of the move from $681 to the recent test of the $1000 level / $1033.90 record high.  Likely target for the correction is $850-$823; if $823 breaks, a retest of the recent $681 low is likely, and a break of $681 may lead to a test of the $635 level and the long-term (2001 to present) trendline.  On a clear break of the $1033.90 high, gold's multi-year uptrend will most likely have resumed. The US Dollar appears to be in a significant uptrend against most other currencies, although the future borrowing needs of the U.S. (likely to be accomplished through money-printing) could end that uptrend very suddenly.  Owning other currencies such as the Euro, Japanese Yen, or Canadian Dollar might help protect your wealth.  However, owning gold may well turn out to be much better insurance against enormous bailout and stimulus packages to be implemented not just by American, but also European and Asian governments throughout the next several years in misguided attempts to boost borrowing and consumption.  Rather ironic, given that it was precisely too much borrowing and consumption that got the world into this situation in the first place. Follow Normann Financial for clear and concise chart and market analysis, as well as updates on whether the Federal Reserve and the other central banks of the world are failing or succeeding in inflating (destroying the purchasing power) of the U.S. Dollar, Euro, and other fiat currencies.  The charts provide far better information than government officials or Wall Street. Given the events presently occurring in world financial markets and the global economy - the likes of which have not been seen since the 1930s - it is vital to protect oneself. Detailed Analysis of Individual Charts of Current Interest: U.S. and World equity markets are in multi-year downtrends, and appear to be entering another wave down which will likely go well below the 2002 lows before the next multi-month counter-trend rally.  Most major indices decisively broke their November 2008 lows this week on a large increase in volume, making a continued decline over the next several weeks very likely. Our call to short the S&P futures when they opened on Sunday March 1 with a tight stop just half of one percent above the opening price in case the market just continued to run down from there - something that occasionally happens once a critical level is broken whether in the up or down direction - has been very successful so far.  We would now recommend moving the stop loss order down to 720.  Should the market continue to fall without hitting the 720 stop in the meantime, we advise covering the short if the S&P 500 approaches 600.  Exiting around 620 might be a good idea as potential target levels are often undershot or overshot by a few percent. Plausible target range for the next intermediate bottom for the S&P 500 is 620-580 and 5900-5500 for the Dow Jones Industrial Average, after which a major rally of 30+ percent to around S&P 800 would be quite likely.  Certain terribly beaten up stocks are likely to have major rallies of 50-100% or more during such a rally.  We'll show charts with suggested entry and stop-loss points for stocks and ETFs like DRYS, FSLR, RIG, XLE, XME, SLX, FCG, and TAN when it appears we are close to a bottom. For the S&P 500 (chart below), note the significance of the 200 day (43 week) moving average.  It tends to offer stiff resistance during major downtrends (a good example of which can be seen during the 2000-2003 bear market), and is currently located around 1015, but rapidly declining toward the 940-980 resistance range.  The plausibility of breaking 980 any time in the next several months has significantly diminished now that the 200 day (43 week) moving average has fallen so far.  Furthermore, while bear market rallies often push a few percent above the 100 day (21 week) moving average, they rarely push more than 4-5% above it, likely capping any future rally attempt at around 900 or lower. Once the market hits a final bottom, all the moving averages are eventually certain to be broken through to the upside, but that may be another year or more away from happening.  For example, during the 2000 to 2002 bear market, the S&P took 31 months from the peak to the ultimate low (down 51% from the peak).  During the 1929 to 1932 market collapse, the Dow Industrial Average took 34 months to hit bottom (down 89% from the peak).  So far, the S&P is only 16 months into its current bear market. When the S&P and most other major world indices eventually successfully clear both the 200 day (43 week) and 300 day (65 week) moving averages, we are likely to see - at the very least - a cyclical bull market lasting a couple of years, and - depending on how things turn out - possibly a new major bull market lasting many years.  But the start of any kind of bull market (and not just a multi-week or multi-month bounce) is likely far into the future for now. Global, European, and Asian (ex-Japan) equity indices are displayed below, and the strong correlation with the U.S. stock market is unmistakable.  All the talk over the past few years about the rest of the world decoupling from the United States appears thoroughly discredited and naive at this point. Europe is going along for the ride, and is down more in percentage points from the peak than the U.S. market. Asian equity markets are down even more than Europe. Commodities have so far given no clear sign that the downtrend which started in July last year has run its course.  The 2001 to 2008 uptrend ended with what looks like a buying panic where commodity prices went parabolic and then crashed through both the 200 day (43 week) and 300 day (65 week) moving averages, as well as the thick, blue uptrend line.  A close back above both long-term moving averages is necessary in order to say with some confidence that the downtrend likely has run its course. The crude oil chart strongly resembles the commodity basket chart above.  Should oil fall toward $25, most commodities are likely to follow suit and make new bear market lows as well. Gold may turn out to be an exception, as it is now acting more like the ultimate currency than just another commodity.  The central banks can print as many Euros, Yen, and Dollars as they please, but the worldwide suppy of gold only grows very slowly and without any regard to the wishes of central bankers around the world. Copper bounced weakly together with world equity markets, but remains below its rapidly falling long-term moving averages.  A further fall down toward its pre-2003 range of $0.90 to $0.60 may be coming up. Until next weekend, have a good trading week.  Always remember that proper risk management is essential - and even more so during volatile markets.

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