Gold has remained strong even in the midst of the dollar rally.  Gold continued to go up even as the US dollar was pulling back.  Today the GLD (gold ETF) is still moving with the US dollar index (UUP), although both are falling.  This is typical of what I call the “European Panic” scenario.  It is at the moment a reversal of that scenario as confidence in the Euro is rising today.  You see there is a race on between the United States and Europe to see whose currency can go to zero first.  Unfortunately, I am just barely joking – at least until our policies change dramatically.

The US dollar index rally has lost strength over the past few days.  The first sign of weakness was the failure to hold onto the new high above the high of 5-13-2011.  In any rally, a pullback of 50-61.8% is “allowable,” meaning that the market can continue rallying after such a correction, but a pullback of more than that would more likely mean a retest of the recent US dollar index low at the minimum.  The other technical sign of weakness was the close the other day below the 50 day moving average.  This rally is definitely NOT as strong as that seen in Nov. 2010.

Today is out of character relative to recent behavior in that stocks are barely up at the moment (SP500 index; SPY; SPX), while gold and the US dollar are down.  One would expect a stronger stock market rally with such Euro strength.  The Euro as measured by FXE is up 0.95% today.  This situation will likely correct itself by Friday when the monthly employment report is isssued.  Banks have scrambled to lower their expectations for employment after the extremely weak ADP employment data on Wednesday.

As for the SPX (SP500 index), the trend is still down.  You can watch the last video I made on the SPX and the numbers still apply.  The market failed to hold the initial close above 1344.07, which was weak behavior. Until we exceed the high from Friday SP500 Index high of 1345.20 on a closing basis, the down trend is still intact.  The video with the chart is here: Key Technical Pointers on the Stock Market

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.