I like being direct. Today’s 5% move which should be a sign of market strength is nothing but a typical bear market counter trend rally; at least it is for now.
S&P 500 (SPX) Forecast
The S&P hasn’t put in back to back gains since February 8th, and hasn’t seen back to back up weeks since September, 2008!
Todays action was fun to watch, but there is so much work to do before it could be considered a bottom. The numbers to watch are 730, 772, and 800. A break above 800 would be the first sign that we’ve turned the corner, with January’s swing high of 943.85 being the point at which a new bull market would start. The the intermediate levels are some of the points of resistance I see on the way.
Sadly, even an almost 6% gain wasn’t enough to turn the indicators on any long term charts. A monthly chart is flashing sell signals on the Arron, MFI, and MACD. All of the trade triangles are red as well.
Gold
With all of the “paper money is worthless, buy gold” commercials on the radio, you’d think gold would be the place to be. On the contrary, gold has retreated each of the past 2 weeks, in what looks to be a normal correction in an otherwise bullish market. I’d look to see gold pull back to around $880, and assuming that holds, be a buyer.
However, the chart on gold is very volatile. It’s this weeks action has pushed gold below the support line of a rising triangle. This, plus the long term double top makes 38.2% retracement very significant. Gold must hold 880, and then break through 1029 to continue the up trend.
The indicators are conflicting. The MACD is rolling over like it’s going to show a sell signal, however, the MFI, a leading indicator, looks like it might be bottoming. Look for buying pressure to increase, and like I said, buy if 880 holds.
Oil
Have I mentioned I hate oil?
However, the chart is very bullish for oild. A break above $50 would see oil really take off. All 3 indicators, as well as trade triangles are showing buy signals. The MFI is rounding off a bit, so look for oil to cool off at current levels. there is tons of support at $42, so I’d look to be long there.
US Dollar (DX)
I’ll keep this short. If 89 holds, and the dollar starts to rise, the sky is the limit. If not, expect sideways action.
CRB
Dollar rising, country minting new bills at record rates, and inflationary pressure is……
Flat. The CRB has to break through 220, (currently at 207) before inflation starts to become dangerous. I don’t see much downside risk in the CRB. Althuogh this is a commodities index, the CRB has been the best predictor of inflation over the past 50 years. Keep on eye on this one. IF the US dollar drops, commodites prices rise, or both, this will be hugely negative for the markets.
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