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 June 26th 2009 Introductory Summary: U.S. and World equity markets are in multi-year downtrends. For now, the recent rally pushed up to our expected 930-945 resistance range for the S&P 500 index, and the 200 day moving average was finally tagged for the first time in about a year!  Many individual stocks and indices also reached significant resistance, and we closed most of our long positions with large profits a bit early rather than risk holding on too long.  For anyone still long the S&P 500, we think this is a very risky proposition at this point. Crude oil finally broke out of its $37-$56 range, and has run up to major resistance between $68 and $80.  We went long oil when it corrected to around $47 (the level around which we previously noted that we expected short term support).  We next moved our stop up to about $49.50, locking in a moderate profit with and the potential for significantly larger profits to come.  Those larger potential profits were realized when we sold out near anticipated resistance between $68-$70.  If $68 breaks on a weekly close, a test of $55-50 is likely.  If $80 breaks on a weekly close, significant pain is likely on the way for most of the world (except - of course - the major oil exporting countries...assuming they are not invaded for their energy resources). Gold has been in a correction of the move from $681 to the recent test of the $1000 level / $1033.90 record high.  We have long stated that the likely target for the correction was around $855-$823, and gold has hit a low of $860 so far.  Gold then moved up for another attempt at breaking the $1000 level.  Whether it breaks $1000-$1050 this time or has another pullback is unknown until we see a weekly close at $1050 or higher. The US Dollar appears to potentially 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.  Right now, the U.S. Dollar Index is sitting right near the critical 80 level, and it needs to rally soon, or else odds will greatly increase that a new downtrend is underway.  When the Dollar breaks, 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 back to our anticipated target area, indicating that the time to exit general equities and re-enter long gold positions likely here - or near. U.S. and World equity markets are in multi-year downtrends. For now, the recent rally pushed up to our expected 930-945 resistance range for the S&P 500 index.  Many individual stocks and indices also reached significant resistance, and we closed most of our long positions with large profits a bit early rather than risk holding on too long.  For anyone still long the S&P 500, we think this is a very risky proposition at this point. When the current bounce ends, 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 near 900.  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 19 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. 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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