Market Timing the US Dollar, SP500 Index and Gold

Would you have guessed that the CEO of JP Morgan Chase, Jamie Dimon, would be pleading with the Fed to leave the banks alone?  He gave the long list of actions that have been taken against the banks to create reforms that purport to prevent another financial meltdown.  Dr. Bernanke’s reply was to thank him for his positive assessment of his efforts.  Mr. Dimon obviously was not on the same wavelength.  These regulations are bad for banks as increased reserve requirements decrease the amount of money that can be lent.  At the same time, do the banks think that they can just go back to business as usual?   The fact that the Fed is bankrolling their profits by keeping interest rates at zero should raise the scrutiny of tax payers.

This explains the horrid action in banks over the past few weeks as the banks have led the market down.  Just take a look at a comparison chart between the SP500 Index and the BKX banking index to see this.

Gold (GLD IAU) has held up fairly well considering the fact that the dollar has been attempting to find some ground lately.  I commented on Twitter today that some support was held today.  If the dollar gets too strong, too fast, gold will likely run into trouble.  ( http://twitter.com/#!/DavidBDurandMD)

Gold CAN go up with the US dollar index.  It can do that in what I call the European Panic scenario.  It is a race downhill between the Euro and the US Dollar.  When the Euro is being heavily sold, the US dollar index benefits, but so can gold.  This week, the Euro has held some ground as the European situation, while not good, is not as bad as it was.  It is an ebb and flow.

And what about the stock market?  Well, the SP500 Index took another technical hit today by closing below 1284 at 1279.56.  It would take a recovery back above 1300.26 to start a legitimate bounce.  It seems the stock market is discounting a rise of interest rates that will occur once the Fed stops buying back our debt at the end of June with the end of QE2 as well as discounting a greater economic slowdown than predicted.  PE ratios are rising as the E’s fall due to rising costs of production (somewhat dissipated by the decline in commodities including oil recently) and falling demand on the part of the consumer.

If you have not seen the likely targets of this SP500 Index pullback, you can review the video with the chart here: Key Technical Pointers on the Stock Market

Also, investor sentiment is weak as I wrote here: Survey Says: The AAII Investor Sentiment Survey

If you liked Mark Haines as I did, please have a look at the last article I wrote about the cause of his death. The facts (vs. prior speculation) are here:Mark Haines Cause of Death:Case Closed

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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This entry was posted in gold, gold etf, investment, Market timing, S&P 500 Index, US Dollar Index and tagged , , , , , , , . Bookmark the permalink.

One Response to Market Timing the US Dollar, SP500 Index and Gold

  1. Jayna says:

    A million thanks for posting this information.

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