Normann Financial’s Weekly Market Analysis

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Introductory Summary:

  • When gold reached our short-term target of about $1200, we closed our gold and silver futures trading positions.  We have since been looking to reenter our long gold and GDXJ junior gold miner trading positions whenever gold traded close to its 10 week (50 day) moving average (currently around $1114 and rising about $1 per day), and we did when gold entered our target range of $1115 to $1080.  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.  However, at this point, odds again favor holding a long trading position as the short-term correction in gold likely has hit bottom or soon will do so around $1080 or higher.
  • We are long a few select stocks – JIN.TO, AUN.V, OIH, MOS, POT, and UAUA while short IYR and ITB (real estate trusts and homebuilders).
  • U.S. and World equity markets are presumably still in multi-year downtrends.  When the S&P 500 Index validly broke the 300 day (65 week) moving average, we stated that this indicated the move up would continue higher.  It then pushed into the next significant resistance range from 1070-1140, 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 significant correction or a second major phase down is likely to begin at some point during the winter, and we may short the S&P futures if the S&P has a surge up toward 1140.  The Nasdaq Composite is about 5% below likely massive resistance around 2400.
  • 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. The short-term correction in gold is likely either complete or soon will be around $1080 or higher, and we expect it to move much higher over the coming months and years.  Only a weekly close below $1080 would make us favor a deeper correction toward $1033.90 – $978.
  • Increasing the odds that the major bull market in oil that began in 1998 has resumed is the fact that the 10 week average (green) has crossed the 43 (blue) and 65 (red) week moving averages to the upside. From 1999 to 2008, that always indicated a resumption of the secular uptrend.  If crude oil breaks $80 by at least 1 percent on a weekly close, a new major uptrend is very likely underway. Should oil have a weekly close beneath the long term moving averages, prices could decline anew.
  • 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.
  • We’ve long expected major support for the U.S. Dollar Index around 74, and the dollar turned up almost precisely from that crucial level.  Our likely target has been the 77.69-82.07 area, and the dollar is now pushing up against the bottom of that range.  A top could be seen anywhere in that range, and only a weekly close near 83 or better would make us expect a much larger, longer-lasting rally to unfold.