Normann Financial - Commodity, Currency, Gold & Equity Market Analysis by Dr. Christian Normann

U.S. and World equity markets are in multi-year downtrends. The S&P has come very close to a valid break of the 300 day (65 week) moving average. However, it has not yet managed a weekly close that is both 1 percent above the 300 day average and 1% above any intra-week high already set during the same rally. At this point, a close at least one percent above this week's intraweek high of 1039 would be required based on our trading rules and guidelines (in other words, a close above 1050) before we can say this likely is a valid break of the long-term moving averages. Until that happens, we continue to believe that the market is most likely far closer to a significant high than a major low at this point. Additionally, likely massive resistance lies between S&P 1080 and 1130, and we do not like the declining volume seen throughout the rally that began in March.
The high level of positive sentiment in equities and gold combined with extremely negative sentiment toward the dollar indicates to us that it is very likely there will be a second down phase for stocks, gold, and commodities in general, where a second phase rise in the U.S. dollar simultaneously takes place. That would be the polar opposite of what the majority of participants in all mentioned markets are expecting. Perhaps the second phase will get underway when Wall Street workers return in full force after the Labor Day holiday (after September 7th).
After crude oil finally broke back up through the $50-55 area, it quickly ran up to major resistance between $68 and $80. Our anticipated short term support around $47 worked out very well as a long entry point, and we sold out with a large profit near $68 - the start of our expected resistance area.

If $80 breaks on a weekly close, a new major uptrend is likely underway. As long as prices do not break $80, our assumption remains that oil prices are likely to decline anew once a second downturn phase begins in the economy and stock market.
Gold corrected the move from $681 to the recent test of the $1000 level - $1033.90 record high. We long stated that the likely target for the correction was around $855-$823, and gold hit a low of $860. Gold then moved up for another attempt at breaking the $1000 level. Whether it breaks $1000-$1050 this time or has another major decline is unclear until we see a weekly close above $1050 or a fall below $900.
We believe the US Dollar may 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 in the critical 80-78 area, and it needs to rally soon, or else odds will greatly increase that a new downtrend is underway. If / when the Dollar breaks down (it might happen now, in 6 or 18 months, or not at all), 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.