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). 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Weekly Market Analysis Based on Closing Prices, Friday March 27th 2009 Introductory Summary: U.S. and World equity markets are in multi-year downtrends.  At present, the current rally has carried up past our anticipated initial target of 800 for the S&P 500.  Given the strength shown in several sectors, the market may push to the next likely resistance level around 850.  It is possible the market may run up to test the 930-945 range on a weekly close at 860 or higher.  That will likely represent a shorting opportunity.  Along with our regularly featured indices and commodities, this week's analysis covers potential long setups in several stocks and ETFs. Crude oil may have bottomed.  It held the important $40-$37 support range, and has rallied up to resistance between $53 and $56.  If oil breaks $56 on the upside, the bottom is likely in.  We are considering going long on a correction to near $47. Gold was 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 has been $850-$823; that may still happen, though the correction might have been aborted by chairman Ben Bernanke's promise to print additional trillions of dollars (click here for the March 19th intra-week update for more Bernanke analysis).  On a clear break of the $1033.90 high, gold's multi-year uptrend will most likely have resumed. The US Dollar appears to still be in a significant uptrend against most other currencies, although the future borrowing needs of the U.S. (as we've long stated is likely to be accomplished through money-printing) could end that uptrend very suddenly.  In fact, it is possible Bernanke ended it on March 18th.  Owning other currencies such as the Euro, Japanese Yen, or Canadian Dollar might help protect your wealth.  However, owning commodities and 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.  At present, the current rally has carried up past our anticipated initial target of 800 for the S&P 500.  Given the strength shown in several sectors, the market may push to the next likely resistance level around 850.  It is possible the market may run up to test the 930-945 range on a weekly close at 860 or higher. If the current bounce fizzles without breaking through the 800-850 range, the most plausible target range for the next intermediate bottom for the S&P 500 remains around 620-580 and 5900-5500 for the Dow Jones Industrial Average. 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 985, but rapidly declining into the 930-980 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.  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. On a weekly close above $9.77, XLF may run up to test the $12.66-$13.68 range. 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. Commodities started a mini-breakout the day before Bernanke spoke on March 18th (please see intra-week updates posted on March 17th and March 19th).  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 and that the final bottom is in.  However, a rally at least up to test the 200 day (43 week) moving average appears likely at this point. The crude oil chart strongly resembles the commodity index / basket chart shown two charts up.  If crude can break the $56 level (and thus break back into the channel - marked in orange - that it followed from 1999-2008), a rally up to test the 200 day (43 week) moving average and resistance in the $68-$70 or even $78-$80 range is likely. Copper has accelerated to the upside, but remains well below its rapidly falling long-term moving averages.  We are still far from proclaiming that copper likely has entered a new bull market, but its persistent rise in recent weeks may add credence to the possibility that the current equity market rally could carry all the way up to test the long-term moving averages rather than failing at lower levels as originally appeared more likely.  Should copper later come down and break its $1.255 per pound low, it is likely that world equity markets will be breaking down to new lows either simultaneously or within a few weeks to months afterwards. The DBB base / industrial metals fund has risen on huge volume recently.  It could be on its way to test the area between the 200 day (43 week) 300 day (65 week) moving averages. The Gold/S&P ratio appears to have entered the correction we anticipated, but is still significantly above our target area as specified in the chart annotations. Until next weekend, have a very good week.  Always remember that proper risk management is essential - and even more so during volatile markets.

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