The Road Ahead

Below is 3 year chart of TLT which tracks the 20+ years U.S. Long Term Treasuries. A foreshadowing of where the bond market as well as the U.S. Dollar is heading to in the long run.

By the end of the day, money has to go somewhere. For this week, there was a rush of money flowing out of the U.S. Long Term Treasuries and into Gold. Gold closed at approximately $900 which is an important psychological barrier for investors. I would not be surprised to hear if another bailout is announced this Sunday night. I will remind you guys that the U.S. Dollar also ended the week strong. It is very unusal to see both the U.S. Dollar and Gold running at the same time. This confirms with my theory posted on Jan 2nd.

I think the focus in 2009 will be U.S. Dollar vs. hard assets such as Oil, Gold and Silver. I would also not be surprise to see the Dollar and hard assets to rise in the medium term because U.S. Dollar remains to be the world’s reserve currency (”safety”) and unemployment is still on the rise around the world. However, once the dust settles, printing presses around the world will lead to massive inflation.

Weekly chart of USD/CAD dating back to 03. Dollar continues to gain strength.

Below is a weekly chart of the U.S. Dollar Index. As I pointed out on Jan 2nd, watch the U.S. Dollar to creep its way back above the 200 MA. So what does this tells us? Well, I can only assume that there is still a LOT of uncertainly in the market, and the market will retest the lows back in Nov 08. The world is still in a state of deflation. The commodities will not run as long as the U.S. Dollar is trending above the 200 MA. If the dollar strengthens more from hereon, it will only cause more pain to our export companies. As a result, I expect team Obama will do whatever it can to trash the U.S. Dollar in the coming years.

An UltraShort ETF that has been gaining massive popularity due to the economy plunging downard in the past few months…especially in the financial sector ETF…SKF. This ETF right now has a great setup of a consolidation. As you can see from box “A” The support level is clearly at the 100 price mark. Sure enough from hitting all the buyers at the 100 price level the ETF bounced 100 points to the 200 mark. Right now in box “B” the technical graph clearly dictates the sellers on this ETF are at the 120 price mark and the buyers still at the 100 price mark. According to the volume statistics there is alot more volume that occurs only when hitting the 100 price mark rather in comparison when hitting the 120 mark. So this is a great oppportunity to either go for a breakout or breakdown on this ETF when the market shows more of a downturn or an uplift of the overall market.

Where do we go from here?

The S&P 500 closed on Friday, Jan 9th, 2009, right at the 20 & 50 dmv. At the same time, a trend line can be drawn from Dec 23rd’s closing to Dec 29th to yesterday’s closed, where do we go from here for the next 2 weeks, Monday will tell.

The pullback was necessary, and technically it is considered to be bullish. However, I think there is just too much bad news out there for the “Obama’s we believe” rally to digest.

With the Federal Reserve printing 25/8, the U.S. Dollar should be weakening in 2009…but weaken against what? Other printing presses around the world?

I think the focus in 2009 will be U.S. Dollar vs. hard assets such as Oil, Gold and Silver. I would also not be surprise to see the Dollar and hard assets to rise in the medium term because U.S. Dollar remains to be the world’s reserve currency (”safety”) and unemployment is still on the rise around the world. However, once the dust settles, printing presses around the world will lead to massive inflation.

Below is a weekly chart of the U.S. Dollar. Look for the dollar to retest the 200 dmv in the coming weeks.

Look for solar stocks to shine going into January 19th. Here are some of the names which crossed the 50 dmv in high volume.

GLD crossing over 200 dmv.

Bailouts (Monday), Weak Dollar (Tuesday), Deflation (Wednesday), Oil up $3 (Thursday), Tensions in Middle East and South Asia (Friday). You get the idea.

This is a very interesting piece on oil & reserve in Saudi Arabia.

Part I

Part II

If I were to know what the price of oil, 6 months from now, I would be in Las Vegas too. Have we reached capitulation yet for oil? Nobody knows.

But let’s not forget, what happen when analysis started calling for $200/barrel early this year?

Separately, oil will be the best indicator whether we’ll be having an Obama rally or the so called infrastruture or 3 million jobs rally comes first quarter of 2009.