-->What a week! Gold soared to a 17 year high today in both dollars and euros. Gold shares are also soaring with the XAU hitting a 20 month high, as both rose above their late 2004 highs, while the stock market slumps. The rising and high oil price (caused now by Hurricane Rita coming on the heels of Katrina), and the quarter point rise in Fed Funds is adding pressure to the markets. Rita is now pressuring the U.S. dollar, overpowering the rate hike, while the Canadian dollar soared to a 13½ year high this week.
Gold's C rise is strong and very bullish because it reached a new high for the major 4½ year rise and especially because it's also at a new high in several currencies. It completed its bullish task and it's clearly in the third step of the bull market. With gold at $471 (Nov), it's caused the leading gold indicator to jump to near the high area of a normal C rise (see Webextra). This means gold's C rise may be near maturity. But if gold stays above $453 and it continues an assent similar to the last two weeks, we could possibly see gold near $500 before the C rise is over. Gold shares are soaring more than gold. Both XAU and HUI have now reached our target for this intermediate rise and their indicator is now near overbought (see Webextra). Plus our strongest gold shares are also overbought, like RGLD, GG, BVN, ABX, GLG, AEM, NEM, TGLDX, EGO, UNWPX and SGDBX. Plus with the South Africans shooting up, ASA and AU are also overbought. Now is the time to start taking some profits in these gold shares. But keep in mind, they could still rise more if XAU stays above 104. Silver has yet to really take off and silver shares like SSRI, CDE and PAAS have room to rise further. Keep these, as well as CEF. Silver closed at a three month high today and it's poised to rise further by staying above $7.10. A close above $7.60 means it could rise to the $8-$8.20 level before the rise is over (see Webextra) Keep your positions. Platinum closed above its April 2004 high today making it a new high for the bull market and it's strong above $910. Even palladium rose this week, which is a good sign for the bull market; it's turning bullish above $200. Copper soared to another record high today and it's very strong above $1.65 (see Webextra). The resource shares look great and these not overbought: BHP, RTP and PD. Crude oil remains very strong above $62 and Rita will most likely push it higher this week, possibly to a record high, which would give gold a further boost. The energy shares are hitting further highs and while many are overbought, some like DNR, NFX, IXC, IYE, ACI, CNX, RIG, NE and DO are not as overbought as the others.
The stock market has been dragging since late July and today the Dow Industrials closed at an 11 week low. It's vulnerable to a further decline by staying below 10530 and it would be outright weak below 10270. Likewise for Nasdaq declining below 2075 and S&P500 below 1200. The Transports remain clearly under pressure below 3650. The Utilities and Amex (Mid Cap) remain very strong above 400 and 1650, but they are clearly overbought versus the rest of the market and a shift in strength could occur. Some of the world markets like Mexico and Japan are strong, but we recommend staying out.
T-Bills (3 months) are acting strange as they fell today after the rate hike. If they close below 3.25%, it would be a strong sign that short rates are near a peak. Bond prices are starting to rise again. They are firm with the yields below 4.23% on the 10 year and 4.70% on the 30 year. Keep your positions.
The Canadian dollar is very strong above.8400 and it could reach our.9000 target before the rise is over. It was the only commodity currency to rise with gold, but the Australian and New Zealand dollars are firm above.7600 and.6950, respectively. Both are still poised to rise. Keep your positions. Meanwhile, the U.S. dollar showed strength in the face of a strong gold price, but the dollar index is still in a downward correction that started on July 5 by staying below 88.50 and it has room to decline further. A close below 86 would show weakness, which would be good for all the major currencies. The currencies are firm above: 1.7930 British pound, 1.2160 euro and.7840 Swiss franc. The yen is weak unless it closes above.9040
Warm wishes and until next week, Pamela and Mary Anne
|