been watching the Mother of All S&P Head & Shoulders
ever since early spring
we now conduct a Tour de Force battle at the Neckline
S&P at 950
it will take a while
but I believe the neckline will fail later this autumn
it will not be taken out easily, obviously
we will see a titanic struggle upcoming
but notice the Left Shoulder, where 2-3 months battled
we will likely see the same on the Right Shoulder
the target price after failure is REALLY REALLY SCAREY
I believe it is around 500, a 40-50% drop on S&P
why would the entire stock market fail? one asks
I believe it will be because of four things:
1. dollar decline will lead to widespread abandonment of US assets, only compounded by distrust of honesty & integrity
2. price inflation will return with a vengeance, as the dollar opens the back door to rising import prices, while TBond selling raises rates to attract foreign capital
3. earnings will be a big disappointment, even with a tepid recovery, as margins are squeezed
4. the investment world and band of economists will realize that Real Estate is living on borrowed time in a bubble, threatening to bring down the US economy
in the meantime, I exited gold stocks today
shouldve done it while in NCbeach zone
that was my plan, and I failed my plan ashamedly
it cost me a few bucks
I expect a dollar bounce next two weeks, with stocks rising
unfortunately, the disconnect between gold and stock/dollar resulted in a decision to exit
the linked dynamic was strong all spring
but now last week gold disconnected from the dollar
in the last four trading days, gold disconnected from stocks
the result has been removing a few pressure factors working on gold
e.g. miners covering hedges
I expect a capitulation among gold stocks soon
so does Slider, so does Pembleton (on Drilling II thread)
the XAU and HUI charts are showing breakdowns
clearer on XAU, but I expect HUI to follow
we could have serious retracement here
the July4th NoShow of terrorist attacks will prompt dollar buying
which will lead to gold selling
sooner or later, people will suspect that the AlQaeda War is being played on our public
it is distracting attention from deeper corruption revelations perhaps
isnt it suspicious why SEC Pitt so vigorously locks down bonuses for WCom, threatens quick prosecution of violators, talks tough, but nothing on indictments of Enron thieves?
I smell a rat with Enron and Bush-Cheney
sorry to say it, because I voted for them, liked them
now I am an abject apolitical renegade running loose
I expect that golds will regroup and stage an incredibly powerful rally this autumn
BUT IT WILL REQUIRE EXPECTATIONS AND REALIZATIONS OF PRICE INFLATION
which is the ugly consequence of the dollar decline
almost nobody in the press or media is talking about it
Asian mfg might keep the inflation at bay somewhat
the question is how much profit margin China will sacrifice in order to complete their capture of Japan
this is China's awaited revenge against their bitter Asian millenium-long enemy
China has gutted much of Japan's mfg base
I believe China will allow prices to rise
because all of Asia must deal with the same price problem
the vengeance I see with price inflation will likely be seen as gradual and unrelenting
as each foreign producer talks of keeping prices down, then doesnt
just like Russia with oil production
talk is easy and appeases OPEC in the immediate
but the reality is that greed wins
prices rise
/ jim |
