15 March 2009



The US stock market's reversal following last Monday's weakness was impressive and included two 90% up-days (days when up-volume was at least 90% of total volume). This signals that the long-awaited multi-month rebound has most likely begun, although it would not be surprising if last week's surge to the upside was followed by a week of consolidation.

The fundamental underpinnings of the gold bull market continue to become more solid by the week, with the latest addition to the long list of gold-bullish factors being last week's decision by the Swiss National Bank (SNB) to pursue an aggressively easy monetary policy with the specific goal of weakening its currency. However, we continue to expect that gold will consolidate below $1000 for as long as it takes to work off the excitement generated by the quick-fire $200 price increase that occurred earlier this year.

The sentiment situation certainly doesn't guarantee that gold won't soon break above its February peak and rocket to much higher prices. It just means that additional corrective activity is the most likely near-term outcome.

At this time we are only short-term bearish on the US$ in anticipation of a euro rebound to the mid-1.30s.

Potential trade: MOO
posted by Dil at 8:21 AM