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Tactical Investor

The Dow has actually has actually gone no where this year

December 3, 2003

Remember the Dow is really not doing much when priced in stronger currencies, this upward move is mostly the Dow re adjusting to the inflated dollar, so in effect it is really static and gives one the illusion that it is rising to new highs. If you really price it in a strong currency, all these fake illusions are immediately shattered and you actually find that the Dow is crashing silently while giving the impression that its going up. Currency collapses are insidious and dangerous and very hard to follow, that's why the masses are going to be handed their heads in a platter one day. The transition from all to nothing will occur very fast.

As you can see in the above chart, when the Dow is priced in terms of the South African rand, the Dow looks very sick and unhealthy. We are right now in a channel formation, its possible that we test the low once again as we did in march this year before we rally again to the top of the channel but notice we are not really making new highs or doing anything that is really bullish or bearish for that mater of fact, we are just stagnant. When the Dow is looked at in terms of a stronger currency the whole picture changes, most Americans are not aware of this concept or even know what the Rand is.

Prior to this, this knowledge was unnecessary because the US dollar reigned supreme but that dream is now over and the nightmare has just begun.

This Chart is courtesy of

Take a look at this chart, it has the Dow priced in Australian and US dollars. Till approx march 2003 the Dow was falling in both currencies, with a mini rally here and there, however since march the US and the Oz dollar parted ways, the Dow appears to be rallying in US dollars but is doing nothing in OZ dollars, it is stuck in a range and forming a channel, so while the Dow looks very rosy when measured in the terms of the US dollar the picture is far from rosy when measured in OZ dollars and all it is really doing is adjusting itself due to the high level of inflation. The one huge problem with a channel formation is that it can break to the downside or upside devastatingly fast.

Ending remarks

The Dow once again rallied from its negative second standard deviation point, it seems that it won't go below that, the last time it touched the -2SD zone was on 9/30/03, after putting in a low at 9230 it rallied almost non stop to a high of 9850, which was the +2SD point on 10/15/2003 after which it proceeded to correct and headed towards the mean slowly and it did this when it hit 9497 on 10/24/2003. It then proceeded once more to attempt to touch the +3SD Zone but was unable and just hit the +2SD zone again at 9896 on 11/03/2003 before it corrected all the way down to the -2sd zone on 11/21/03 at 9585. Well to wrap this all up this pattern has been occurring non stop since march of this year and if this pattern carries on it shows the Dow going to the +2SD point which is right now at 9989 then it should correct to the mean which is now at 9650 and then take of once more to blast through 10K most likely.

I mentioned that one would have to use SD points about 2 months ago if one wanted to be in a position to predict this market in some accurate manner and that all we were going to get was mini corrections. Once again a very rudimentary way of using SD is to get a software that allows you to adjust the settings on the bollinger bands, then set them at 2 and 3 SD's. In addition use a moving average of 30 for the mean.

All these rallies are illusionary in nature, the Dow is actually losing value and silently crashing when priced in other currencies, till it starts to rally in other currencies, Dow 10,000 or even 11,000 becomes meaningless if the US dollar carries on following. After all when the Argentinean peso collapsed and Gold shot in price over 300%, did any of you care no because the net effect was 0. Think of the US dollar as the Argentinean peso of tomorrow and the only way to protect yourself against such blatant and evil inflation is with Gold and Silver bullion.

Take a look at Gold priced in multiple currencies to understand what is really going on night now .We are witnessing the beginning stages of a Currency crisis the likes of which this world has not seen for a very long time. When we get close to the final stage the only weapon against this plague will be Gold and Silver bullion.


Sol Palha



December 3, 2003

The naturally occurring gold-silver alloy is called electrum.
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