Just for the record I figured I'd post the weekly chart of the DJIA with the obvious downtrend from where it closed at over 14,000 some 2 years ago. We are now officially half way from the top and half way from the bottom. Hooray. As I posted yesterday, the Dow has done absolutely nothing for 10 years but lose to inflation. Now I would like to tell you the reality of just how badly it has. In the 10 years since the Dow first hit 10,000 The US dollar has dropped by 25%. Adjusted for that the DJIA is at a pathetic 7,537. Barely 1,000 off the low. Way too go! (and they call gold a lousy investment! Which by the way is up 350% since the end of Oct 1999.... yeah....) This information on the Dow I would like to say is from the website www.zerohedge.com which If you have never been there has some more than interesting stuff, and I do recommend it. (To quote someone from that website, "I want my 10 years back")
As most people who know me can tell you I try not to concern myself with the DJIA so onward to the point.
There is a hurricane brewing and it's name is "monetary policy". It's coming soon and faster than I originally thought. I have said time and time again my predictions for the rest of 2009. I will state them again.
Gold=1200/oz
Oil=90/barrel
Euro V Dollar =1.58-1.60
US$ index= .72 or lower
I'm starting to think I'm being way too conservative. Especially on the dollar, and possibly on gold and oil too.
Everything comes down too the dollar, and I don't just mean market wise either. Gold is the leading indicator, whether Mark Haines wants to admit it or not. It is the lone element right now screaming to us that inflation is coming. Now, either it's predicting things to come, or it's a fluke and all the gold bugs are crazy. Today the move higher in gold was from what I believe confirmed by a breakout of oil from it's $75 resistance point. As the dollar continues to decline and oil production falls from the obvious peak we have hit, things will only go up from here. The crowd that says oil's rise is do to economic recovery and how $65 a barrel is good for the consumer and $72 a barrel confirms the markets move higher/economic recovery, will now look at things from a new perspective as oil reaches dangerously close to triple digits once again. They will walk on egg shells as they realize that $90 barrel of oil is way ahead of any recovery in the economy and with an unemployment rate of 10% , not at all good for the consumer. Today there was an article on AOL.com about "Sticker shock" at the grocery store. We are beginning to feel it and it only gets worse from here.
This is all centered around the dollar. Oil and other commodities will begin to move higher and everyday costs will go up. Jim Rogers 20 year bull market in commodities is dead on. Gold and oil will continue to rise and the dollar will continue to go down. And then it will happen. The dollar will have the floor pulled out from under it. The only reason that a weaker dollar is "good" for the market as far as anyone is concerned is because they know there will be a recovery and when there is, they know that the dollar will reverse and move higher. The day is approaching soon when it will begin to dawn on people that that may not happen. That the dollar has fallen a little too far a little too fast. Markets are the leading indicators. The people on Wall St see it before the people on Main St. This will not be the case this time around. It will be universal.
I think gold is getting ready for another big move to the upside soon. (And when I say soon I mean a few weeks at the most) One that will take out the 1080 resistance point people have been talking about and possibly beyond 1100 too. The powers that be will not let the dollar fall too drastically as most people including myself predicted it would as it breaks through .76. The consensus is that a organized decline in the dollar is ok, so for now an organized decline is what they will get, on it's way to .74 which gold has already factored in. (Far too organized if your paying attention.)
Stay long Gold and Oil, and remember, this is what we voted for.
-Jonathan M. Mergott
Alchemy Financial Management
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