-- Posted Sunday, 8 November 2009 | | Source: GoldSeek.com
By: Dr. Christian Normann, Chief Strategist, Normann Financial
Increasing the odds that we may see a new bull market in commodities is the crossing of the 10 week average (green) above both the 43 (blue) and 65 (red) week moving averages. From 1999 to 2008, that always indicated a new uptrend. (Note: these weekly moving averages closely correspond to 50, 200, and 300 day moving averages when taking into account market holidays).
Commodities as measured by the CRB Index are pulling back from a long term resistance level around 285 to a long term support level around 264.
At the same time, all moving averages are located in nearly the same location just below the 264 support, and should provide additional major support if the index pushes a bit below 264 (which is likely to happen, at least on an intra-week basis).
We expect a low in the CRB to form between 265 and 258, followed by a rally to at least near 300 before the next significant pullback / correction.
There is never any guarantee in trading or investing, but this is as good a setup for going long as one is ever likely to find. We are acting on it by buying crude oil if the pullback in the CRB Index continues to this support area. For anyone who does not trade futures, one can trade USO or DBC (alternatively UCO or DYY for those that want leverage).
Crude Oil is Likewise Near the Buy Point of an Excellent Setup
As with the CRB Index, the 10 week average has crossed the 43 and 65 week moving averages to the upside. From 1999 to 2008 - also like the CRB - this always indicated a resumption of the uptrend in oil.
Support is currently expected in the area between the three pink lines, roughly from $74.50 to $71.50. We will add to our long position on any pullback near that area or a weekly close at least 1 percent above the $79.86 high from 2006.
Perhaps we are about to see a second phase of a secular bull marked in commodities and crude oil.
Gold Soars Against All Currencies - Not Just the U.S. Dollar
The chart below shows the gold price divided by the US Dollar Index Bearish Fund. In effect, it shows how gold is moving when measured in the currencies the US Dollar Index consists of. The index is a weighted geometric mean of the dollar's value compared with:
Euro (EUR), 57.6% weight
Japanese yen (JPY), 13.6% weight
Pound sterling (GBP), 11.9% weight
Canadian dollar (CAD), 9.1% weight
Swedish krona (SEK), 4.2% weight
Swiss franc (CHF) 3.6% weight
When gold recently broke out from a cup and handle formation marked by the thick green line, we stated that the pullback in gold measured in foreign currencies was providing an excellent entry-point. We also stated that gold appeared to be starting a significant move against paper currencies in general, not just the U.S. Dollar. That move accelerated to the upside this week, and the next likely hurdle for gold priced in the currencies that make up the Dollar Index is the February 2009 high. It may take two or more attempts to break that high (a significant high is usually not successfully broken on the first attempt).
Gold acted very well last week, rising strongly even as most other commodities fell.
Have a very good week in the markets.
Always remember that proper risk management is essential.
All the best,
Christian Normann
dr.normann@post.harvard.edu
www.normannfinancial.com
For the complete version of our weekly analysis including many additional and significantly larger charts (as well as potential setups in commodities, currencies, stocks and ETFs) please click here
Dr. Normann is a graduate of both Harvard University and Florida Atlantic University, with one of his degrees in Finance (summa cum laude and 4.0 GPA).
Previously, he was a financial advisor with Morgan Stanley Dean Witter, but left ten years ago because he wanted the freedom to do completely independent research and focus on perfecting his own trading style and investment skills.
He first entered the financial markets in 1995, trading currencies for his own and his family's accounts. Later, he expanded into equity, commodity, futures, and bond investment and trading, and has extensively studied the history of financial markets going back to their origin centuries ago (covering multiple extraordinary mania periods and subsequent busts).
Please visit the About Normann Financial page for important information about risk management and position sizing. We provide analysis in good faith and to the best of our ability, but all information on the Normann Financial website is provided solely for educational purposes and does not constitute investment advice. Learning to operate successfully in the financial markets is not easy - it takes a substantial amount of time, effort, and discipline. Your trading and investment decisions are exclusively your own responsibility. Proper risk management is crucial.
-- Posted Sunday, 8 November 2009 | Digg This Article
| Source: GoldSeek.com
