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 in good faith and to the best of our ability, but all information on this website is provided solely for educational purposes and does not constitute investment advice.  Learning to operate successfully in the financial markets is not easy - it takes a substantial amount of time, effort, and discipline.  Your trading and investment decisions are exclusively your own responsibility.  Proper risk management is crucial. Weekly Market Analysis Based on Closing Prices, Friday April 10th 2009 (Most markets closed for the week on Thursday due to the holiday) Introductory Summary: U.S. and World equity markets are in multi-year downtrends.  At present, the current rally has carried up near our anticipated target of 850 for the S&P 500.  Given the strength shown in several sectors, the market may run up to test the 930-945 range on a weekly close at 865 or higher.  That will likely represent a shorting opportunity.  Along with our regularly featured indices and commodities, we cover potential setups in several stocks and ETFs, as well as updates on the progress of those that have already reached our entry points. 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.  If oil has a short-term correction, it may find support between $47.50 and $45. Gold likely remains 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 between $855-$823, and last week went as low as $865.50.  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 gold and commodities may well turn out to be much better insurance against enormous bailout and stimulus packages to be implemented not only 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: The Gold/S&P ratio has corrected almost back to our anticipated target area. U.S. and World equity markets are in multi-year downtrends.  At present, the current rally has carried up to our anticipated target of 850 for the S&P 500.  Given the strength shown in several sectors, the market may run up to test the 930-945 range on a weekly close at 865 or higher. If the current bounce fizzles without breaking through the 800-850 range (a break being defined as a weekly close at 865 or higher), 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 at 973, rapidly declining further 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 17 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 several years.  More than anything, the longer-term outcome may depend on the future world energy situation.  Will there be sufficient crude oil and natural gas production?  Will (and can?) alternative energy sources be scaled up quickly enough to compensate for potentially declining world oil and gas production?  For now, the start of any kind of bull market (and not just a multi-week or multi-month bounce) is likely well into the future, but these questions will quickly take center stage when the world economy attempts to resume its growth.  The level of the oil price - measured both in terms of paper currency and in ounces of gold - will likely be the single most important factor with regard to the future of the world economy. 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 having decoupled from the United States appears thoroughly discredited and naive at this point.  Perhaps some level of decoupling between different regions of the world might eventually occur, but it is likely to be a long-term process and to happen only to a limited extent. 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 solidly 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 has added 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 increases recently.  It could be on its way to test the area between the 200 day (43 week) and 300 day (65 week) moving averages. 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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