Taylor On US Markets & Gold
TRADER ROG'S CORNER
Strong Market Reversals In dollar, Gold & Oil
The market reversals we had forecast have occurred. The four critical
markets of the nine in this report are the U.S. dollar rally and reversal, the powerful rally in the XAU, and the impending third wave rally in oil, which in my opinion is going to power this chart all the way to $60 a barrel based upon indicators and chart patterns I see today. Our other big one is the nearly six-point jump in the CRB, powered primarily by oil, but pushed by metals and grains as well. Gold already reached over $422 and closed at $420.40. It had been sitting on $415. The XAU jumped out of its down channel and over the lower resistance line to close at 94.90. I expected bullion to lead stocks, but this big XAU move tells me the precious metals stocks may begin to run ahead of the bullion cash prices. Our dollar could still go either way considering it's on the trading range fence, but I expect it to sell off first, back to .8250 support, before trying to rally once again.
These markets had been expected but I did not expect so much in one or two days nor anticipate the power in the XAU and CRB. Mainline stocks closed higher today as well, but these commodities do not appear to be affected or concerned with the Dow and NASDAQ. In summary, the last two days demonstrated the most important action of 2005 so far this year. I consider this the turning point we had both predicted and expected.
1. Dow Jones Industrial Average: Closed at 10,796.01, +46.40. The ten-day
PMO average is showing a crossover and moving up. The current price wave
appears to be forming a very large double top that is very bearish, but
this wave is still incomplete. The small divergence off a previously
declining PMO wave while prices are moving upward at a nearly 70 degree
angle tells me a blow-off top in the Dow could be near. Price bars were all
above the three moving averages, which is bullish. The angle of climb tells
me the Dow should begin to drop hard in about 10-14 days. This sell off
would be consistent with action on other charts. Bad news was everywhere in
stocks earnings reports this week, including Dell, Cisco, H-P, and many
others. There is no definitive single factor to power the Dow over the
10,850 topping range. The new channel lines are showing us a bear flag
formation. Short trend is up. Intermediate trend is up. The main trend is
down. We recommend SPY put options for May 2005. Closes below 10,400 take us to 9700 support. Below 9700, we support at 9300.
2. S&P 500 Large Cap Index: Closed at 1205.30, +8.29. Like the Dow, the new channel angle is up more severely, showing a top is coming. The topping
formations are not as severe as the Dow, indicating that when the selling
begins, it will be slower and more modest than the Dow. PMO lines crossed
over in a bull pattern. Volume was strong. Main support is roughly 1165.
All moving averages were surpassed with this strong rally wave. When 1145
support is broken, the 200-day EMA is the next support. Short trend is up.
Intermediate is up. The main trend is down. This market is difficult to
short as the PPT can jump in at end of a trading day and buy a load of S&Ps, stopping declines. Buy S&P put options with further out dates. We see
1075-1100 with ease.
3. NASDAQ 100 Index: Closed at 1530.51, +23.68. This stock index is showing much more weakness than the Dow and S&P. The PMO lines touched but did not cross. The main, long resistance line is down for many months and we have a very nasty triple top fully formed, telling me selling will be fast and furious when it begins. Main support is about 1500, close to where we are right now. The price bars are under the 50-day, almost on the 20-day, and just 43 points above the very important 200-day moving averages. The short trend is up (higher closing price bar), but the intermediate trend is down, and the long trend is down. Traders can buy the QQQQ longer-term put options. Stock puts can be purchased on select, very weak, large company
stocks like some phone companies and the weaker computer component
manufacturers. The NASDAQ will sell faster and before the Dow and S&P500.
4. 30-Year Treasury Bond Price: Closed at 115.81, -0.22 ticks. Bonds hit
over 117.00 this week and appear to have rolled over to sell. The PMO lines
have peaked at +1, which is resistance. Support is 115.00. Main support is
112.50 and 110.00. This market has fooled many investors and traders with
its inconsistent moves. We have recommended put options for March with a
110.00 strike price. Futures traders are taking great risk in this confusing market, which is quite irrational. Price is above all three moving averages. The short trend is down. The intermediate trend is up. The long trend is up. Most investors and traders should stay out of this market for the time being.
5. Gold: Closed at 420.40, +$3.50. Price is still under main resistance at
429.00. Gold has completed a five wave down pattern and moved up in a new
wave one. PMO has bottomed and turned up in a cross over at -.1 support.
Price is over the 200-day and 20-day averages. It is 5 points below the
50-day, which is 425.39. Price is preparing to move up and through a
channel, down bearing resistance line at 422, which price touched and
retreated from today. I expect it to push through this resistance next week
in a move to 426 and 429. Over 429 resistance is 435/6, then 445, then 455. By April, price should be minimum 455 and possibly 476 top line resistance before selling back to 455 support. The short trend is up. The intermediate trend is down. The long trend is up. XAU rally strength would encourage gold and silver stock buyers and qualified futures traders.
6. XAU Gold & Silver Index: Closed at 94.90, jumping up in gap rallies over
two days. XAU moved up over six points in two days with great power. It had
found main support on the 86-87 area and pivot reversed almost straight up.
Price jumped over the lower support channel line and over the top of the
top line down channel at about 93.00. Some of the silver stocks moved up
over 6% in one day. Price is a hair under the 50- and 200-day moving
averages. It is over the 20-day average. PMO lines crossed, bottomed and
turned up at -2.5 on the PMO graph. This is support exactly one year ago.
We see the XAU up to 105 resistance within 4-6 weeks. Top resistance is
110.00. This market showed significant strength in just a two-day period.
Expect some strong buying over the next few weeks as metals rally. The
short trend is up. The intermediate trend is down. The long trend is up. We
do not trade this index. If we did we would be buyers going long until the
first of April 2005.
7. U.S. Dollar: Closed at .8458, +0.02. The dollar hit .8475 main resistance, blew through to .8500+ and pivot reversed and closed back under main resistance. PMO lines show uptrend with resistance at this same level back in March 2004, which is +.50 PMO. Dollar is under the 200-day average
at 85.97 resistance. Should this be broken and closed, it goes to .8800
resistance. I think the dollar has topped for the short term and goes back
to .8200 support, and possibly .8100. After that, it could chop in the
.8200-.8450 range for months. Its rally is still within the up channels
from a late December bottom near .8000. Price is over the 20- and 50-day
moving averages. Since it's on the fence today, we need to wait and watch
for further chart patterns. The short term is down. The intermediate trend
is up. The long term is no trend-to the side.
8. Light Sweet Crude Oil: Closed at 47.80, +0.11. Price is above all three
moving averages. Price is in middle of up channel above both lower channel
lines. The PMO lines have gone from down to up in a quick cross over. A
five wave down pattern is completed. A two wave up pattern is completed.
Oil is beginning to move up in a large three wave, which is the largest of
the up waves. All this after a major double bottom in December. Next
resistance is $50.00. Next trading range is 48.50-52.50. Next topping
resistance is 57.00+. Main high resistance is $60.00. With other factors
considered and the large double bottom in place, we expect $60 this year,
perhaps by the beginning of the spring driving season in late April. The
oil rally looks especially strong to us. The short trend is up. The
intermediate trend is up. The long trend is up.
9. CRB: Closed at 286.18, +0.91. Price has been locked into a continuation
pattern and appears ready to break through top resistance at 287-288. Once price has broken out of the continuation triangle pattern, expect 288, 290, and 295 top resistance. If we have a hard inflation push this year, I think the CRB could visit its former high top of 330. Higher lows bounced off a divergent PMO pattern, and price is above all three moving averages. The powerful CRB rally is driven primarily by oil and is starting to run with
metals and grains as well. This looks like commodity inflation and portends
changes in higher interest rates from the Fed. We do not trade this index,
but those that do, can go long and stay long until April. The short trend
is up. The intermediate trend is up. The long trend is up.
SUMMARY
Markets produced strong activity in the direction of gold, silver, oil, grain, and other commodities. This pattern could top in approximately six weeks before a selling reversal. This trading cycle is the best of the year for silver. It is the second best of the year for gold. Oil has a pattern that only reads bullish. The last two days mark a significant turning point in 2005 futures, stocks, and commodities trading. -Trader Rog.
February 21, 2005
Jay Taylor, Editor of J Taylor's Gold & Technology Stocks
www.miningstocks.com
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