Most Popular
1. It’s a New Macro, the Gold Market Knows It, But Dead Men Walking Do Not (yet)- Gary_Tanashian
2.Stock Market Presidential Election Cycle Seasonal Trend Analysis - Nadeem_Walayat
3. Bitcoin S&P Pattern - Nadeem_Walayat
4.Nvidia Blow Off Top - Flying High like the Phoenix too Close to the Sun - Nadeem_Walayat
4.U.S. financial market’s “Weimar phase” impact to your fiat and digital assets - Raymond_Matison
5. How to Profit from the Global Warming ClImate Change Mega Death Trend - Part1 - Nadeem_Walayat
7.Bitcoin Gravy Train Trend Forecast 2024 - - Nadeem_Walayat
8.The Bond Trade and Interest Rates - Nadeem_Walayat
9.It’s Easy to Scream Stocks Bubble! - Stephen_McBride
10.Fed’s Next Intertest Rate Move might not align with popular consensus - Richard_Mills
Last 7 days
Stock Market Brief in Count Down to US Election Result 2024 - 3rd Nov 24
Gold Stocks’ Winter Rally 2024 - 3rd Nov 24
Why Countdown to U.S. Recession is Underway - 3rd Nov 24
Stock Market Trend Forecast to Jan 2025 - 2nd Nov 24
President Donald PUMP Forecast to Win US Presidential Election 2024 - 1st Nov 24
At These Levels, Buying Silver Is Like Getting It At $5 In 2003 - 28th Oct 24
Nvidia Numero Uno Selling Shovels in the AI Gold Rush - 28th Oct 24
The Future of Online Casinos - 28th Oct 24
Panic in the Air As Stock Market Correction Delivers Deep Opps in AI Tech Stocks - 27th Oct 24
Stocks, Bitcoin, Crypto's Counting Down to President Donald Pump! - 27th Oct 24
UK Budget 2024 - What to do Before 30th Oct - Pensions and ISA's - 27th Oct 24
7 Days of Crypto Opportunities Starts NOW - 27th Oct 24
The Power Law in Venture Capital: How Visionary Investors Like Yuri Milner Have Shaped the Future - 27th Oct 24
This Points To Significantly Higher Silver Prices - 27th Oct 24
US House Prices Trend Forecast 2024 to 2026 - 11th Oct 24
US Housing Market Analysis - Immigration Drives House Prices Higher - 30th Sep 24
Stock Market October Correction - 30th Sep 24
The Folly of Tariffs and Trade Wars - 30th Sep 24
Gold: 5 principles to help you stay ahead of price turns - 30th Sep 24
The Everything Rally will Spark multi year Bull Market - 30th Sep 24
US FIXED MORTGAGES LIMITING SUPPLY - 23rd Sep 24
US Housing Market Free Equity - 23rd Sep 24
US Rate Cut FOMO In Stock Market Correction Window - 22nd Sep 24
US State Demographics - 22nd Sep 24
Gold and Silver Shine as the Fed Cuts Rates: What’s Next? - 22nd Sep 24
Stock Market Sentiment Speaks:Nothing Can Topple This Market - 22nd Sep 24
US Population Growth Rate - 17th Sep 24
Are Stocks Overheating? - 17th Sep 24
Sentiment Speaks: Silver Is At A Major Turning Point - 17th Sep 24
If The Stock Market Turn Quickly, How Bad Can Things Get? - 17th Sep 24
IMMIGRATION DRIVES HOUSE PRICES HIGHER - 12th Sep 24
Global Debt Bubble - 12th Sep 24
Gold’s Outlook CPI Data - 12th Sep 24

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Financial Market Investors & Traders Beware The Ides of March

Stock-Markets / Financial Markets 2010 Mar 16, 2010 - 09:22 AM GMT

By: Steve_Betts

Stock-Markets

Best Financial Markets Analysis Article“Beware the Ides of March”, Soothsayer to Julius Caesar

Last night the Chinese market treaded water with little change and I would like to continue the discussion started over the weekend with respect to the US’s largest creditor. China’s recent stimulus package was instrumental in preventing a major slowdown in their export sector as the world economy cooled. Now they are busy reigning in an economy that is growing at more


than a 9% pace, and they’ll do that by reducing the money supply, reigning in credit and increasing taxes. One thing they won’t do is appreciate their own currency, even in the face of protectionist rhetoric coming out of the United States.

Although I am convinced that China will come out of the current economic crisis smelling like a rose, there will be serious implications for the US as China tries to but the brakes on its economy. China will subsidize exports and that means that cheap exports will get even cheaper. Right now you can buy a Chinese 4x4 pick-up for almost half the price of a similar Toyota of Chevy, and there is little difference in quality as the motor, transmission, and rear end are all made by Mercedes. What’s left of the US industrial base will continue to try and relocate in China putting further strain on US unemployment. Perhaps the most serious problem will involve China’s desire to accumulate US debt, or should I say lack of desire. Since they’ll need to utilize their reserves to subsidize their own economy, China will end up being a net seller of US debt and that will put further strain on the Fed’s printing press.

This strain will first become apparent in the behavior of the US dollar and then later in the bond market. Although the greenback has enjoyed a healthy reaction of late, mostly due to deflationary pressures, I believe that risk has now been mostly discounted. The budget deficit for the month of February alone came in at an astounding US $229 billion and I now believe the FX market will turn its attention toward the method used to finance US debt, i.e. the printing press. I believe that’s why the US Dollar Index turned down at the 81.32 resistance and may now be forming a top. After all, it’s ludicrous to think that you can expand supply almost exponentially and still believe the price will rise. It didn’t work with tulips, and it won’t work with the US dollar.

This morning the spot US Dollar is trading up .27 at 80.06 and still well below the neckline of a huge head-and-shoulders formation that took close to two decades to complete. Recently the US Dollar Index enjoyed a reaction from the November 74.23 low to the February high of 81.34 that came very close to retracing exactly 50% of the previous decline from 89.62 to 74.23 (using closing numbers). Given the fact that the budgetary pressure will increase throughout the year, we me very well have seen the top and now the rest of the world will go back to the old strategy of trying to control the dollar’s decline. I see the first the three supports at 79.35 as crucial, and any close below that level would confirm a top. Meanwhile the dollar is range bound.

Then we have the anti-dollar, gold, that is in the inverse position as it holds above strong support at 1,048.70 and is trying to break out above strong resistance at 1,148.90, but so far with little luck:

Today the spot gold is trading up 4.60 at 1,106.10 and above good support at 1,090.10. The immediate direction of gold is joined at the hip with the dollar, and both are watching the Dow with considerable interest. Note that gold also has a large upside down head-and-shoulders formation and is holding above its respective neckline. Should deflationary pressures increase you could expect to see both gold and the dollar challenge their respective necklines. On the other hand if the Dow were to finally confirm the new highs in the Transports, you could take that as a sign that the Fed is winning its battle to “inflate or die”. That means gold will soar and the dollar will tank. All in all, this should be a very telling week for gold, stocks, the US dollar and the bond.

E-mail:  team@thestockmarketbarometer.com
Web site: www.thestockmarketbarometer.com

The Stock Market Barometer: Properly Applied Information Is Power

Through the utilization of our service you'll begin to grasp that the market is a forward looking instrument. You'll cease to be a prisoner of the past and you'll stop looking to the financial news networks for answers that aren't there. The end result is an improvement in your trading account. Subscribers will enjoy forward looking Daily Reports that are not fixated on yesterday's news, complete with daily, weekly, and monthly charts. In addition, you'll have a password that allows access to historical information that is updated daily. Read a sample of our work, subscribe, and your service will begin the very next day.


© 2010 Copyright The Stock Market Barometer- All Rights Reserved
Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

© 2005-2022 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in