• Of great long-term significance, gold successfully broke out of a 19 month long base when it had a weekly close at $1048.  Gold now has expected major support between $1033.90 and $978.  A weekly close below $970, while not expected, would indicate a failed breakout. 

• When gold reached our short-term target of about $1200, we closed our gold and silver futures trading positions.  We keep our long term investment position in gold at all times, but the odds absolutely did not favor maintaining our long trading position when gold was stretched about as far above its 10 week moving average as it normally ever gets.  Given subsequent action, a deeper correction to between $1034 and $978 appeared likely, and gold appears to have bottomed within one percent of our ideal target range.  Silver almost precisely hit the level at which a bottom was most likely to form.  As of Friday February 19th, gold is positioned in a rare setup that normally only comes along once or twice every 15-20 months.  Notably, silver, crude oil, and the CRB Commodity Index are all in equally rare and compelling setups (the setups are based on a set of rules that depend on weekly closes and the weekly stochastic indicator, and the rules are customized for each item to increase the frequency of good signals as they all have slightly different personalities).

• We are currently long the Euro (EURUSD), Norwegian Krone (by being short USDNOK), GDXJ (Junior Gold Miner ETF / Fund), JIN.TO, EAS.V, AUN.V, gold, silver, and crude oil futures while short IYR (real estate trusts).  We closed our GME short position with a 20 percent profit.

• 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 and temporarily broke above the 2007 to present downtrend line (in dark blue) before plunging to close well below it again just two weeks later.  The S&P recovered 53 percent of the 2007-2008 decline (the halfway point is S&P 1120), and corrective moves tend to most often top out after retracing between 50 and 62 percent of the previous move (62 percent would be about 1230).  We believe a second phase down likely has begun, though it could turn out to be no more than a major correction as long as there is no weekly close below 940.  Likely support areas for the S&P are seen at 1060, 1000-920, and 800-760. A weekly close below 760 would argue for 666 being the next target.  Nearest resistance for the S&P is 1110.

• Crude oil broke major resistance at $78 - $80 ($79.86 was the significant high set in 2006) during the first week of 2010, but turned around and cleanly broke back below the same level a mere two weeks later.  Failed breaks of important levels usually lead to significant moves in the direction opposite of the original breakout.  We got a sharp move in the opposite direction, but now appear to have put in a potentially significant bottom given the deep decline in the stochastic indicator (refer to the crude oil chart further down) combined with a sharp price reversal.  A weekly close at $81 or better will make this highly probably.

• The $CRB Index broke major resistance at the 284-285 level (the 1983 and 1984 major highs and 2007 significant low) during the first week of 2010, but turned around and cleanly broke back below the same level a mere two weeks later.  Failed breaks of important levels usually lead to significant moves in the direction opposite of the original breakout.  We got a sharp move in the opposite direction, but now appear to have put in a potentially significant bottom given the deep decline in the stochastic indicator combined with a sharp reversal.  We could well be on the verge of another break through the 284-285 level.  If this happens, that break is more likely to hold.

• For a long time, we expected major support for the U.S. Dollar Index around 74, and the dollar turned up almost precisely from that crucial level.  80.5 to 81.5 has looked like the most likely target, and the dollar has now pushed into the sweet spot.  A top could be seen anywhere up to around 82, and only a weekly close near 83 or better would make us expect a much larger, longer-lasting rally to unfold. 

• Long-term U.S. Treasury Bonds have been declining toward critical support between 114 and 112.  If 112 breaks on a weekly close, significantly lower prices (and higher interest rates) are likely on the way for the next several years.  For the secular uptrend in bond prices (downtrend in interest rates) to remain in force, a bottom needs form near present levels.  So either the long bond breaks down in the next few months and long-term rates go significantly higher (and, as a result, mortgage rates too), or we get at least temporary relief with bonds rallying back toward resistance and long-term rates falling.  Given the amount of borrowing the Federal Government is planning to do over the next several years, odds appear to strongly favor the scenario of a major breakdown in bond prices this year (with a corresponding rise in interest rates).

• 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 destroying the purchasing power of the U.S. Dollar, Euro, and other fiat currencies through inflation.  The charts provide far better information than government officials or Wall Street.

We have been looking forward to the launch of the new Van Eck ETF (Exchange Traded Fund) tracking the Market Vectors Junior Goldminers Index for quite a long time:

http://www.4asset-management.net/en/Research/MV/MV/MVGDXJ.html  and  http://www.vaneck.com/index.cfm?cat=3192&cGroup=ETF&tkr=GDXJ

The ticker is GDXJ, and it recently began trading.  We expect GDXJ to vastly outperform GDX in the long run.