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Some Important "Unusual" Technical Indicators

April 17, 2005

Bottom line of the charts that follow is: It seems that speculators are starting to exit the "hot" markets

Rising tops and bottoms in price accompanied by falling tops and bottoms in PMO is bearish for oil.

Similar picture in Commodities Index

Flight to "safety" of long bonds? If you are trading oriented, Cumulative Cash Flow is looking toppy; but if you are investment oriented a break above 175 could indicate an important change in mindset. I would watch this carefully. Look how the PMO is giving a buy signal - even as the Cumulative Cash flow is heading for previously rarefied territory

Flight to safety of gold? Note how P&F relative strength chart of Gold: Commodities appears to be bottoming. An eventual break-up through the 162 level (if this should occur) will be calling for a subsequent move of 33% by both horizontal and vertical count techniques.

Is this possible? Well, rising weekly chart of goldollar index still intact

Question: If the market forces treasury yields down in a flight to safety, will this underpin the US Dollar as funds flow into the USA, or will it undermine the US Dollar?

In my mind, the following could be consistent with a flight to safety:

  1. Rising bond prices (falling yields) as money is parked there
  2. Rising dollar as money floods into US Treasuries
  3. Rising Gold as "conservative" money takes a portfolio balancing approach

If the US Dollar rises on falling US Long Bond yields, it will stuff the weaker economies. They will need to raise interest rates to protect their currencies. With equity and commodity markets - and non US currencies - going south, an extraordinary amount of capital may be wiped out on a world-wide basis. This is not a comfortable confluence of events.

I was thinking on the week-end about "Sir" Alan Greenspan. If there is any more compelling evidence that the epicentre of world power lies with the Establishment I would like to know what it is. Here we are, hundreds of years into American "Independence", and the Queen of England is still knighting her loyal US subjects. As I see it, giving him a knighthood was the Queens way of saying "thank you" on behalf of the Establishment.

Well, I wonder if the Establishment will be feeling quite as thankful a year from now.

The Federal Reserve Bank of New York holds the world's largest accumulation of monetary gold.
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