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Week of April 13, 2005
The stock market and oil sold off today taking gold and energy stocks with it. Gold, silver and the currencies, however, are building a short-term base.
Gold appears to be forming a B low if April gold can now stay above $423. But the B decline is not over yet until gold closes and stays above $433. Keep an eye on $423 and $433 this week (see Webextra). Silver also looks good and firm above $6.95, and a renewed rise may be starting if May silver now stays above $7.15. It would be strong above $7.65. Gold shares, in stark contrast, were hit today. Some gold shares are still above their February lows like XAU while some closed at new lows for the year like HUI. This gold strength over gold shares is not a good sign for gold shares as we showed you in the monthly, but we need to see more before a confirm is in. Gold shares are near an oversold area and if the B decline is near an end, the current lows may be the lows for gold shares. Keep an eye on XAU's February low because a break below would be a bad sign at 88.50. If it holds and XAU closes above 95, however, weakness will be over. Keep your positions. Oil fell sharply from an overbought area this week, falling to our key area near $50.40. If oil stays near or above this level we could see it stabilize. Major support is at $44.
Oil stocks have also come down, but they are well above their major supports and are now near oversold.
The stock market is increasingly vulnerable. The Transportations fell sharply last Friday and since then the market ceased to rise with the falling oil price, as the record trade deficit added downward pressure. Today's sell-off means the market is getting closer to the edge because several indices closed at or near their 2005 lows. If the Dow Jones Industrials close and stay below 10380 as well as Nasdaq below 1970, the five week downward correction will snowball into a steeper decline. Nasdaq has been leading the market on the downside as it's been declining all year. Nasdaq is weak short-term below 2025 just as the Dow is weak below 10550 and Transports below 3700. The Utilities are holding up best reaching a new high yesterday. It's strong above 350. If you're holding index stocks, sell. The world equity markets have been coming down or rolling over. They are also losing steam with the U.S. market. It's time to sell if you're invested.
The U.S. dollar's four week rebound rise continues with the dollar index above 83.50. But the dollar index is stalling below the February highs, while the medium-term indicator nears an intermediate high area (see Webextra). If the dollar index stays below the high at 85.20, the dollar's stability since January may be ending. Above 85.20 means it could still rise to possibly 86.50 but even if it does, the major trend will remain down (see Webextra). Keep an eye on 83.50 and 85.20 this week; whichever way it breaks will tell the next short-term trend direction. The Canadian dollar had been holding up the best, but it fell this week while the other currencies are stabilizing. The Aussie and Kiwi dollars may be starting to lead the currencies in a renewed rise. They are both now firm if they stay above.7750 and.7170, respectively. The others are stabilizing if they stay above: 1.2850 euro, 1.8650 British pound,.8270 Swiss franc and.8050 Canadian dollar. The euro would look good above 1.3050.
U.S. bond prices continue to bounce up in a short-term rebound, following the two month slide in February and March. They could bounce up further while the 10 year yield declines further to possibly 4.26%, but even if this happens, it won't change the bigger picture, which is up for long-term yields and down for bond prices. It would provide a better exit level if you're still holding bonds.
Warm wishes, and until next Wednesday.
Pamela and Mary Anne
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