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Commodity, Currency, Gold, and Equity Market Analysis by Dr. Christian
Normann |
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Weekly Market Analysis Based on Closing
Prices, Friday November 6th 2009
Introductory Summary:
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U.S.
and World equity markets are presumably still in multi-year
downtrends.
The S&P validly broke the 300 day (65 week) moving average. It
pushed into the next significant resistance range from 1070-1120,
and recovered almost 50% of the 2007-2008 decline (the halfway point
is S&P 1120), which is
approximately where corrective moves tend to top out.
We believe a second phase down is likely to begin at some point
during the fall/winter, and it may already be underway.
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Gold appears to have successfully broken out
of its 19 month long base with a weekly close at $1048. Gold
has expected support between $1033.90 and $978. A weekly close
below $970, while not expected, would indicate a failed breakout.
We expect gold to move much
higher over the coming months and years, and have added to our long
gold position twice in the last few weeks.
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Increasing the odds that we will see a new bull market in crude oil
is the fact that the 10 week moving average has crossed the 43 and
65 week moving averages to the upside. From 1999 to 2008, that
always indicated a resumption of the uptrend.
If crude oil breaks $82.80 on a weekly close, a new major
uptrend is very likely underway.
Should oil have a weekly close beneath the long term 43 and 65 week
moving averages, prices could decline anew.
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The CRB Commodity Index has confirmed it is likely back in a primary uptrend
as its 10 week moving average has, as
with crude oil, also crossed the 43 and 65 week moving averages to
the upside. The CRB Index is near an almost perfect setup for
going long.
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The US Dollar
(as
measured by the US Dollar Index) may be headed for a test of the
all-time low of 70.70 recorded in 2008 after closing 1 percent below
the late 2008 low of 77.69. A weekly close at 82 or higher is
needed to resume the uptrend. There is reason to think it may
have some sort of a rally - potentially a large one - from around 74
+/- 1,
and it may indeed already have bottomed (see details noted on the chart).
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Follow Normann Financial for clear and concise chart and market
analysis, as well as updates on whether the Federal Reserve and the
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| Detailed Analysis of Individual Charts of Current Interest: |
The Gold/S&P ratio has corrected back to our anticipated target
area (1.00 to 0.80), indicating that the time to exit general equities and re-enter
long gold positions likely here - or near.
Gold has risen over 400 percent against
the S&P 500 since year 2000, which is the same as saying that the S&P
500 currently is down over 80 percent when measured in gold - honest
money - and that is after the huge rally in the S&P since March! |
U.S. and World equity markets are presumably still in multi-year downtrends.
The S&P validly broke the 300 day (65 week) moving average. It
pushed into the next significant resistance range from 1070-1120, and
recovered almost 50% of the 2007-2008 decline (the halfway point is S&P
1120), which is
approximately where corrective moves tend to top out.
We believe a second phase down is likely to begin at some point during
the fall/winter, and it may already be underway.
The high level of positive sentiment
in equities combined with extremely negative sentiment
toward the dollar indicates to us that it is quite likely there
will be a second down phase for stocks, where a second phase rise in the U.S. dollar simultaneously
takes place. That would be the opposite of what the
majority of market participants are expecting.
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. Initial support is likely around
the long term 43 and 65 week moving averages, then near S&P 800.
If S&P 765 breaks on a weekly close, the odds of a continued fall down to
test the March low at 666 increases significantly. A total
collapse down to below S&P 500 / Dow 4000 cannot be entirely ruled out
either. An 89% decline as from 1929 to 1932 would take us to about
S&P 175 and Dow 1550. We may not ever get that far, but we may go
lower than most can imagine. However, there is also the
possibility that the nominal value of the stock market does not fall
very much (or even rises somewhat), while the stock market still
collapses further when measured in gold (rather than paper dollars).
Recent developments increase the odds of this scenario.
Now that gold has broken out above $1034, we expect it to go up
substantially over the next several months and years. Unless the
stock market starts to rise at an equal rate, general equities will be
falling when measured in honest money whose value the central banks
cannot inflate away.
A final bottom in the stock market 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 24 months into its current bear
market. There could thus easily be
about
a year of decline left for the equity markets.
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| Until next weekend, have a very good week. Always remember
that proper risk management is essential - don't fall victim to
complacency just because the markets have seen much lower volatility
over the past few months. There could be - and most likely
will be - at least one more major leg down for general equities this fall / winter,
and volatility appears set to increase once again. |
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Normann
Financial - Commodity, Currency / Forex, Gold, and Equity Stock
Market Analysis by Dr. Christian Normann Trading Investing
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