It is disappointing for the bulls that gold fell even as the U.S. Dollar stabilized. Gold usually moves contrary to the U.S. Dollar. This time gold demonstrated greater weakness. Is gold fighting deflation, as evidenced by a shrinking M3 money supply and a slowing velocity of money? If I were a member of the Fed and wanted to kick start the economy, I would encourage gold to rally. A little perceived inflation could go a long way. In retrospect, gold's rally with energy was not all that impressive either. But physical demand for gold is expected around $320. June gold has support between $310 and $320. June gold needs a strong close above $340 to confirm an intermediate bottom. ...July silver has bottomed just above $4.30. Stiff resistance begins at $4.70 in this wide swinging trading range. ...July platinum has stabilized as expected at $600 support and the uptrend line. Resistance--$640. ...May copper has support at 70 cents. Resistance begins at 75 cents in this choppy market. ...June palladium fell to new lows of $162 on April 14th. Palladium hit a 6-year low on oversupply.

Recommendation

Futures investors may purchase June gold on a strong close above $330 with a $321.90 open protective stop. Target: $340 minimum, possibly $350.

Stocking up? Only in the select Reaper Long-Term Investor Portfolio categories. Also, see General Market Comments.

...The June DJIA must close convincingly above 8500 to revalidate the uptrend (into summer solstice?). A strong close above 8500 could result in a test of 8800 resistance. But a weak close below 8100 would again bust the bulls' bubble. The bias is up for now. And as goes the DJIA, so goes the S&P (Resistance--920-940, once 905 is exceeded. Support--860). NASDAQ? It is a weak sister and overvalued again. ...Here are 51.1% bulls, 31.1% bears. Funds are fully invested. The seasonal tendency is down after April into late October. So diamonds (DIA's) may not be forever. ...Treat this as a bear market rally. The S&P is selling for 31 times reported earnings, with a meager dividend yield of 1.87%. Profits of Fortune 500 companies are down 66%. U.S. corporate profits at 3% of GDP are the lowest ever. The percentage of companies who increased their dividends in first quarter fell 48%. No wonder, therefore, office vacancies have reached 16.2%. But thank God retail sales had a dead cat bounce. With the Nikkei 225 stock average at fresh 20-year lows, the U.S. consumer had to raise at least one spending hand one more time to keep the world economy afloat. There is little selling pressure now.

Recommendation

Futures investors may sell June S&P short only on a sell stop at 860 with 8916 open protective stop. Target: Less than 800. (See above. The bias is up near term unless the 860 low is broken.)

As stocks rally the interest rate futures--T-bonds, T-notes--tend to sell off. Technically, the toppy distribution pattern since last October suggests long-term interest rates have bottomed. Interesting (pun intended) that this has occurred while $180 billion has flowed into bonds over the last year. Distribution? At the lowest rates in 50 years? If June T-bonds close above 112 the pressure downside will be relieved near term. But if June T-bonds close weakly below 110, the downtrend (higher long-term interest rates) will be established. If a downside break occurs, one would think it would be accompanied by weakness in the U.S. Dollar. ...Inflation? The CPI is up at a 7.2% annual rate, its fastest pace in the last couple of years, but probably oil/war inspired. ...Over at Fannie Mae, there has been a 9,300% increase in refinancing over 1990, yet Fannie Mae's net worth was off 2% last year. Top of the real estate debt balloon?

RECOMMENDATION

Futures investors who purchased put options in June and September T-bonds--hold.

Crude oil, heating oil and unleaded gas are all tracking together. They are in no man's land until OPEC meets in Vienna on April 24th and decides whether to cut 2 mbd OPEC considers excess from global production. Present OPEC production is 26.34 mbd. The quota is 24.5 mbd. Does the U.S. now have a swing vote in OPEC since it controls Iraq's oil? With Iraq, the U.S. now produces 15% of the world's oil supply. Iraq's production could increase in just a few weeks from the northern oil fields, and be up 2-3 mbd in 6 months. Iraq is the third largest OPEC producer, and with 112 billion barrels in reserves, is second only to Saudi Arabia. U.S. crude oil supplies are down 16.2% from a year ago. Nigeria and Venezuela both are coming back on line, however, with increased production. Both supply the U.S. July crude oil has resistance at $28 with support at $25. ...June unleaded gas has support at 82 cents, down from its March 9th high of $1.11. Thus, the U.S. summer driving season and my SUV have been saved! ...May heating oil has resistance at 85-95 cents and support at 82 cents. ...Natural gas is in a bull market, going into the heavy demand summer driving season with natural gas storage down 50% year-on-year.

Recommendation

High risk futures investors who profitably purchased July natural gas on a strong close above $5.25 use $5.44 open protective stops and $5.23 open protective stops. First target of $5.50 hit. Expect $5.75 minimum.

April, 2003

R.E. McMaster, Jr., Editor
The Reaper
P.O. Box 84901, Phoenix, Arizona
800-528-0559
www.TheReaper.com

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