Saturday, September 06, 2008

Market Review


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The us dollar broke a 2.5 year downtrend:

The last time this happened was in 2005. When it broke a 2yr downtrend, it proceeded to trend up for over 8 months. For Gold to touch $1000 again, the us dollar has to close below 70, and I don't see that happening, at least not this year. In fact, on the next pullback in the USD, it might actually be an opportunity to short Gold.

SPY is on the way to test 120. 2 of the 3 major components of SPY, Energy (XLE) and technology (XLK), have already broken below their respective July lows. So, how fast SPY gets to 120 depends on XLF. XLF was surprisingly resilient in the past week, ending the week basically flat while the rest of the market tanked.
The Fannie Mae and Freddie Mac rumour of being taken over by the Feds, while significant and bad for its stockholders, is probably not the right catalyst to trigger a huge drop in XLF on Monday.
The BPSPX is still at a lofty level of 47, so there is plenty of downside remaining.

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