Daryl Guppy – US$1,340 is Gold’s New Long-Term Target:Charts
In recent weeks, the price of gold has rebounded from the support level of US$1160, due to 3 main factors.
First is the confirmation that China has been buying gold and that it has become easier for people to buy gold. The World Gold Council estimates China produced 313 tons of gold in 2009 but demand is expected to be more than 420 tons.
Second, is the suggestion by the U.S. government that they will move into a second round of quantitative easing. This fear is combined with the developing double-dip in the U.S. economy as shown by the head-and-shoulder reversal pattern in the Dow.
Third is the call by American investment analysts at Goldman Sachs that gold could reach the price of US$1,300. This is a conservative estimate, and just a few dollars higher than its recent high of US$1,248.20.
Gold is built on demand and supply, but its movement is driven by psychological factors. This is seen in the variety of psychologically based patterns in the gold behavior. The first of the these was the parabolic trend that developed between March and December of 2009. This trend shows accelerating excitement which collapses quickly. The 2009 December price retreat was sudden.
This was followed by an inverted head-and-shoulder pattern starting January of this year and ending in March. This pattern captures the increase in bullishness as market trends recover. The chart pattern target of US$1,250 was achieved in June. The pullback from this pattern target found support near US$1,160 and this is the important technical feature used for understanding the potential future price development.
A peak at US$1,250 and support at US$1,160 have the potential to define a broad trading band. The upper edge of the band was tested in May and June. The lower edge of the band was tested in January, April and July. The width of the band is projected upwards above the upper edge of the band and provides a longer term price target near US$1,340. There is a high probability the new trend will develop consolidation behavior near US$1,250 before breaking above this resistance level.
Source: 2010 CNBC, Inc.
Disclaimer: Please be informed that the above mentioned stocks/indexes/investment instruments are solely for the purpose of education; it is NOT a recommendation or an invitation to trade/invest. For trading/investment advice, please speak to your remisier, dealer representative or financial adviser. Please understand that there is risk in every trade/investment venture, know your risk first before you venture into any of them.
RED ALERT!! It Looks MORE Like 2nd Tsunami Wave Rather Than Just A Normal Correction!
Since my last post on WARNING!! Is The 2nd Tsunami Wave Here Or Is This Just A Normal Correction, it seems that the stock markets, especially the European and U.S. stock markets, are acting like a toy balloon in a room full of razor blades. Even China SSE is not spared, it is already down 31% since August 2009. Worst case scenario is that U.S. maybe set for a rare double-dip recession that will send its unemployment soaring, home values crushing and may trigger another new round of banking and credit crisis.
7 reasons for my pessimism:
1. Sovereign debt crisis leaving investors worried: More and more investors are viewing Europe’s sovereign debt crisis as a sneak preview of the future in U.S. After all – U.S. debts is far greater than the PIIGS (Portugal, Ireland, Italy, Greece, Spain)!
2. High U.S. unemployment rate: Despite everything Washington has tried to do, nearly 1 in 4 American workers is still struggling to get by without a paycheck. Worse: The job growth of recent months has now dwindled to nearly nothing. After 431,000 new jobs were created in May, only 83,000 appeared in June.
3. 70% of the U.S. economy is beginning to shut down: Domestic consumption is responsible for 70% of all economic activity in U.S. – and consumer confidence is cratering. Worse: U.S. retail sales are already plunging!
4. The housing slump in U.S. has returned with a vengeance: New home sales just cratered by 33%, the biggest decline on record. Foreclosures are increasing again, creating new nightmares for U.S. largest banks. Worse: ARM(Adjustable Rate Mortgage) resets just started in May this year and more foreclosures is expected, as explained in my post U.S. Housing Crisis Over? Re-think Again! 2nd Wave Maybe Coming!
5. Most U.S. states drowning in debt, eg. New York, California and others going down for the 3rd time: The 50 U.S. states now have a cumulative deficit of US$127.5 billion. Plus, states have more than US$1 trillion in pension obligations they can’t pay. They must make massive spending cuts to survive - cuts that are sure to impact corporate earnings and stock prices from coast to coast.
6. U.S. economy is quickly running out of gas: The recovery that followed the bear market was bought and paid for with US$2 trillion in government stimulus money. Now, that money is running out! U.S. economy and stock market are running out of steam. And with no new stimulus on the horizon, there’s nothing left to keep stocks from declining. If U.S. goes down, rest assured that the rest of the world will be pulled down as well, including our little red-dot called Singapore.
7. China’s economy maybe slowing down: With Europe as one of its largest exporter, the Europe’s debt crisis is going to hit the demand for Chineses goods.
In my humble opinion, I feel that we have NOT seen the low of the global stock markets and I expect to see further decline from here. Short-selling is the way to ride this current market weakness. In fact, people should consider liquidating their long positions into any rallies, rather than buying aggressively into the market right now. In view of the possibility of high inflation, precious metals, like gold, silver, commodities, natural resources and hard assets are also good instruments for us to protect our precious wealth.
I really hope that I am wrong and I have to admit that I always am! Please be prepared for the worst as we will see more bumpy road ahead!! I want to stress again that the downside risk is much higher than the upside potential at this point of the time. So please be extremely careful!
Disclaimer: Please be informed that the above mentioned stocks/indexes/investment instruments are solely for the purpose of education; it is NOT a recommendation or an invitation to trade/invest. For trading/investment advice, please speak to your remisier, dealer representative or financial adviser. Please understand that there is risk in every trade/investment venture, know your risk first before you venture into any of them.
Doing The Dead Cat Bounce? DOW 5,000 in 2010? – Robert Kiyosaki
Dow 5,000 in 2010?
In my last column I predicted a “dead cat bounce” in the stock market and a possible Dow plunge to 5,000 this year. Obviously, many readers mocked my prediction.
But the dead cat bounce is very important, especially in today’s market.
Simply put, ‘a dead cat bounce’ looks like Diagram 1 below:
The market crashes, rebounds, and runs out of steam, then crashes again…unfortunately, and possibly, to a lower low. When professional investors observe a ‘dead cat’ forming, many will begin to sell. If their selling leads to a panic, the stock market goes even lower.
Putting today’s numbers to the ‘dead cat’ diagram gives this topic more meaning.
In 2002, the Dow hit a low of 7,286.
In 2007, the Dow hit a high of 14,164
In 2009 the Dow fell and stopped at 6,547.
Dow 6,547 is where the market stopped falling and the dead cat bounce began. At 6,547 the market was oversold and buyers came rushing back in, looking for bargains. The Dow headed back up, and a bear market rally began.
On February 5, 2010 the Dow closed at 10,012.
What Does This Mean?
So the question is, “What do these numbers mean to me?” The answer to that question depends upon you. If you are a bullish person, you will be optimistic, reassured by these numbers, and looking forward to the Dow breaking 14,000 soon.
If you are bearish, you will be waiting for the dead cat to finally die and for a double dip recession to begin.
One of the theorists (and writers) I follow is Richard Russell, a wise sage who is in tune with markets and the madness of crowds. He has been in the business for about 50 years, so he has the wisdom and perspective of time. Lately, he has been writing about the ‘50% Rule’ of Dow Theory. I thought I would pass it on to you because it may assist you in seeing the future of the economy, even if –like me — you do not trade in stocks.
The following is my interpretation of the ‘50% Rule’ using real numbers.
In 2002 the low of the Dow was 7,286.
In 2007 the Dow hit a high of 14,164.
The ‘50% Rule ‘number is 10,725…the halfway point between 7,286 and 14,164.
In 2007, when the market headed down and broke 10,725, professional traders who follow the Dow Theory ‘50% Rule’ knew what was going to happen next. On March 9, 2009, the crash stopped at Dow 6,547.
On that day, what I believe is a ‘dead cat bounce’ began as the market moved up.
On January 19, 2010, the Dow stalled at 10,725 and headed down again. This is spooky. The 50% rule came true.
The next interesting point is 7,286, the low of 2002, when the rally began. According to Russell, if the Dow holds at 7,286 and begins a rally, this might be a good time to buy. But if it fails to hold at 7,286 and slides past 6,547, then look out for dead cats dropping from the sky. Russell predicts that Dow 1,000, the number at which the Dow began its rally in the 1970s, may not be out of the question. If that happens, there will be millions of baby boomers joining the dead cats falling from the sky as their 401(k)s and IRAs implode.
Other Markets
This ‘50% Rule’ may apply to other markets such as gold, the hot commodity of this era.
In 1971 gold was $35 an ounce. I began buying gold in 1972 when I was a pilot in Vietnam, watching the Vietnamese panic when they knew the U.S. was not going to win the war.
Gold hit a peak of $850 an ounce in January of 1980.
Gold dropped to a low of $252 in July of 1999. Obviously, I bought a lot of gold in 1999. Gold was at an all-time low because Central Banks, such as the Fed and the Bank of England, were dumping gold in an attempt to protect the value of their counterfeit currencies.
According to the ‘50% Rule’ of Dow Theory, when the price of gold was passing $600 an ounce(halfway between $850 and $252), a rally in gold was on. When gold passed $600, mainstream financial experts began warning of a crash in the price of gold… stating that gold was in a bubble.
Today gold fluctuates between $1,000 and $1,200 an ounce.
Is Gold in a Bubble?
When you factor in inflation and devaluation of the U.S. dollar, $850 gold in 1980 is $2,500 an ounce in today’s dollars. In other words, gold might be at 50% at $1,200, which is the highest of highs. Could there be a run to $2,500?
Your personal answer to that question will depend upon how confident you are in Fed Chairman Ben Bernanke, President Obama, and Wall Street. If you have faith in our leaders of commerce, don’t buy gold. If you do not have faith in them, maybe you should buy gold or silver.
If the dead cat bounce dies and the Dow drops to 5,000 in 2010, as I predict, then the price of gold and silver may die with the dead cat of the Dow, as investors cling to cash. The next question you need to answer is, “If the Dow dies and the price of gold and silver drop, what should you invest in at the bottom…stocks, gold and silver, or cash?”
I know what I will do. I will buy more gold and silver. Why? The answer is because I trust gold and silver more than Central bankers, the Oval Office, and Wall Street. Gold and silver have been real money for thousands of years.
The Lost Decade
The people I am most concerned about are the average investors who have bought their financial planner’s advice of “Invest for the long term in a well-diversified portfolio of stocks, bonds, and mutual funds.”
Many investors are calling the past 10 years The Lost Decade. That means those who invested for the long term in stocks, bonds, mutual funds, and cash are long-term losers. Japan has been in a Lost Two Decades.
A ‘lost decade’ means:
1. Zero job creation.
2. Zero economic gains for the typical family. Home values are down and many families owe more on their home than the home is worth.
3. Zero gains in the stock market.
Over the next few months, it is important to watch both the Dow and gold. As I write, the Dow is around 10,000 and gold is at $1,000. If the Dow breaks 7,286, the 2002 low, and continues down below 6,547, the 2009 low, watch out below. If 6,547 is broken and gold passes $2,500 an ounce, you’ll have even more to worry about.
Source: Yahoo Finance
Disclaimer: Please be informed that the above mentioned stocks/indexes/investment instruments are solely for the purpose of education; it is NOT a recommendation or an invitation to trade/invest. For trading/investment advice, please speak to your remisier, dealer representative or financial adviser. Please understand that there is risk in every trade/investment venture, know your risk first before you venture into any of them.
Global Market Outlook For Week Beginning 12th October 2009
2700 really proves to be a very tough resistance level for STI to crack, it has till now altogether tried 4 times unsuccessfully! It maybe attempting for the 5th time these coming weeks. If it can be broken, the next ceiling will be at 2746, the previous supports attained in Jan and March 2008. I am cautiously optimistic that STI will just have enough strength to hit 3000 before year end comes. We should see a substantial correction in coming 2010.
Trading for the China market has just resumed after a week long celebration of the 60th anniversary of PRC and the mid-Autumn festival. Shanghai Stock Exchange (SSE) will be trading and consolidating between the 2600 and 3000 level to provide a solid base for further uptrend continuation to retest the early August high of 3478. This current consolidation should be viewed as a pause in the long term uptrend rather than the start of a trend reversal for SSE.
Hang Seng Index (HSI) is now climbing towards the 21930 level attained on 17th Sept 209. It will have enough momentum to head towards the next 23300 and 26300 resistance levels if this 21930 ceiling can be penetrated. The immediate support for HSI is at the 21200 level.
In U.S., S&P 500 maybe testing the 1080 resistance level soon. If this can be accomplished, it will have enough strength to climb higher towards the next resistance level of 1168.
Technically, NASDAQ seems to be the stongest index among the 3 major U.S. indexes. It is now approaching the barrier of 2167 level. If it can power through this resistance level, it will have a good chance of testing the next ceiling of 2319.
If Dow Jones can break the 9918 level, it will face a very stubborn resistance at 10,000 level, about 100 points away. Personally, I believe this will be a very very DIFFICULT level to break through. Till now, Dow Jones is lagging behind the other 2 major US indexes, only rallying 53% from the March low, as compared to 71% for NASDAQ and 62% for S&P 500.
Personally, I feel that the global stock markets may have another 1 or 2 more upburst before they experience a substantial correction next year. I am quite sure that the double-dip recession will come next year, but how bad is it going to be, only time will tell. Let’s all enjoy this party, created by the excessive money pumped in by all the central banks in the world through bailouts and stimulus plans, while we can because next year we should see some very bumpy days ahead, maybe well into 2011. I have doubt that we have seen the worst of the financial meltdown triggered by the subprime mess YET 
Disclaimer: Please be informed that the above mentioned stocks/indexes/investment instruments are solely for the purpose of education; it is NOT a recommendation or an invitation to trade/invest. For trading/investment advice, please speak to your remisier, dealer representative or financial adviser. Please understand that there is risk in every trade/investment venture, know your risk first before you venture into any of them.
Global Market Outlook For Week Beginning 28th September 2009
STI has the tested the 2700 level 3 times but is still unable to break this stubborn resistance successfully. It may experience a pullback to the immediate support level of 2560. If 2560 cannot prevent the drop, the next support levels will be at 2521 and 2424 respectively. Singapore market seems to have lost its upward momentum, it is now going through some consolidation before it has enough strength to break through the 2700 level, hopefully going towards the 3000 mark before the end of the year.
Trading for the China market will be light this week because of the 8 days “Golden Week” break. SSE will most likely consolidate between the 2600 and 3000 level, before it can gather enough momentum to break the 3000 ceiling to retest the early August high of 3478. At this point of time, signs are still showing that this is just a temporary halting of the upward momentum, the long term uptrend for SSE is still intact.
After breaking the resistance of 21200, Hang Seng quickly fall below this level in quite a drastic manner. It should find some support at around 20600 level, based on the uptrend line drawn starting early March. If 20600 cannot provide the necessary support, HSI may have a chance to fall back to 19400, the low attained in early September this year.
S&P 500 could not hold above the 1060 level for long and dropped consecutively for the next 3 trading days. The next immediate support will be at 1039, follow by the next uptrend line support of 1000 level.
NASDAQ did not have enough strength to power through the ceiling of 2167. As a result, it declined together with the general weakness in the US market. The next support for NASDAQ will be at the 2050 level.
Dow Jones is experiencing weakeness as well, with the next closest support at 9630. If this fail to provide the necessary flooring, the next critical support will be 9250. The 10000 level will be a very very tough ceiling to crack if it can trend upwards from here.
I can feel that the markets are slowly running out of steam as they have run too far ahead of the real economy. People are starting to realise that the “green shoots” are not really growing into small plants, instead some of them may have slowly turn into yellow weeds. Our Finance Minister Tharman has already forewarned us that we may have a double-dip recession next year, which I fully agree. The stock market has already factored in for a good economy recovery, it may turn down next year when the fundamental does not live up to the expectation. If this happen, we will most likely have a W-shaped recovery, rather than a V-shaped recovery predicted by a few TOO optimistic experts. A lot of experts associate this financial crisis to that of the Great Depression, which started from October 1929 and ended in July 1932, Dow Jones collapsed almost 90% after having a few powerful rallies. This current financial crisis started around October 2007, has it come to an end after just 18 months? I doubt so, we may see some after-effect of weakness, maybe in 2010.
Disclaimer: Please be informed that the above mentioned stocks/indexes/investment instruments are solely for the purpose of education; it is NOT a recommendation or an invitation to trade/invest. For trading/investment advice, please speak to your remisier, dealer representative or financial adviser. Please understand that there is risk in every trade/investment venture, know your risk first before you venture into any of them.
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