Stocks, Dollars, and Gold: Market Timing Update

US Dollar Index Breakout(USDX, UUP,EUO – FYI note tax forms needed in even IRAs if you trade UUP or EUO- speak to your broker):

IF this move above 75.63 in the US dollar index holds and the Euro continues down by the close, a significant dollar rally may be under way.  Right now, it is just BARELY above 75.63, so the jury is still out. The US dollar index must hold above that number for at least 3 days to have this stick and any move back below there could sharply reverse the current mini-trend.  The Euro just broke a head and shoulders formation on short term intraday charts and is headed to around 140 as a first stop.

The SP500 Index is falling from the critical 1294.26 level having failed a breakout yesterday (see prior post updates done on the March 21st posts). We are likely headed into a second down leg, which should lead to a buying opportunity at least for a bounce.

Gold (GLD,IAU) is again attempting a run above 139.54 for the GLD. I doubt it will succeed today but if all we get is a retest of the last high, your trading dollars in gold will remain in jeopardy.  I am as usual not talking about your core gold position which in my view should be looked upon as a “cash” holding – at least at this point in time.

When gold is in a down trend, it can look like any other commodity. And silver is much worse than gold in this respect – look at the 2008 sell-off in silver.  But gold is morphing into something else.  It’s being viewed as something you simply hold to maintain the value of your liquid assets.  But this is something that could change if the world makes different decisions.  So don’t let anyone convince you that gold cannot go down by 25%, 50% or even by more than 50% because IT HAS!  Don’t put all your eggs in ANY one basket.

Best regards, Dave

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Standard Disclaimer: Remember, it’s your money and your decision as to how to invest it.

© 2011 David B. Durand, M.D. All rights reserved.

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