11/05/2010 by Philinje.

Currencies and equities came back to their breakdown level yesterday and currencies have been sagging again, while gold just about touched its all-time high just minutes ago, reaching $1224.  Silver jumped up again and is now above $19.

The mood seems to be skeptical. Another huge bailout - will that work? There are rumors about the Fed re-opening swap lines with Europe to enable buying of the Euro, ie, intervention. Intervention might cause a short squeeze in the near term, but ultimately the market will have its way.

It’s an interesting question whether gold will rise or fall or stay level with a falling dollar. Assuming the Euro gets defended, the dollar will drop. But does that mean gold will fall as the perceived need for a safe haven is lessened? Or will it move up or stay stable because the world is waking up to the massive money printing going on? Or will it rise along with commodities?

Regarding silver, the New York Post has followed up its recent piece about the whistleblower with this story:

http://www.nypost.com/p/news/business/feds_probing_jpmorgan_trades_in_gZzMvWBqOJpB55M7Rh9vwM

Apparently the CFTC is pursuing a civil probe and the Justice Department is pursuing a criminal probe into JP Morgan’s silver trading. Interesting. Could that have something to do with silver’s strange behavior of late? The past few days in silver look like perfect steps - absolutely flat until the next move straight up. After watching silver on a daily basis for the past few years, I can attest that this behavior is bizarre.

Anyway, gold and silver are the only commodities moving up and it seems they have some kind of fuel that is not so tied to the dollar or the equity markets. Could it be that the obvious recourse to money printing, now firmly reinforced by Euroland, is finally causing a broad exodus to gold and silver?

Well, investors in Europe will definitely see gold as an alternative to their currency. US investors, on the other hand, have the dollar as a safe haven. So the huge strength in Euro gold could be a big factor in gold’s strength.

Regarding my earlier post, it’s still possible that there will be another move up in equities shortly that could exceed Monday’s highs. It’s what happens after that that will be interesting. And keep in mind there could be some intervention in the Euro before too long.

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11/05/2010 by Philinje.

Opinions on the equity markets at present diverge wildly. Some people say the recovery is back on track after a possible further 5% drop and others say this is the beginning of a massive decline.

What seems likely is a short rally then a further drop. The levels to watch for are 11,000 or less in the Dow Jones and 1190 or less in the S&P. If prices don’t make it past those levels and then cross below 10,300 and 1100, last Friday’s lows, another decline is underway.

The ending levels of another decline could be below 9870 and 1066, the lows of last Thursday.

In terms of the dollar and Euro, there may be another move up to above 86 on the dollar index and to 1.25 or less for EUR/USD. The Euro’s low in Oct 08 was 1.23.

One commentator has pointed out that Oct 13 08, the day after a major crash and when bailout funds were forced on major banks, is very similar to last yesterday, May 10 10, in one very important respect: NYSE market breadth in terms Advance/Decline numbers spiked to record highs, meaning there was a huge rebound. But that lasted all of 2 days last time, and ultimately led to the Mar 09 low. This time, it’s Euroland getting a trillion-dollar bailout and will things be different?

The dynamics seem similar to Oct 08. Governments moved too slowly and then threw enormous bailouts at the problem just as the markets were coming undone. That didn’t prevent further declines. Now we’ve had a recovery that achieved the 61.8% retracement of the decline (11,246 on the Dow), which is a natural level to achieve, and the same bad movie is playing out.

You need to form your own opinion but personally, I’m looking for a top in the next few days. Currencies are already pretty tired today, so it’s possible we won’t even get above yesterday’s highs. But if we do, there is plenty of resistance overhead.

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