Gold at Technical Support Levels

The chart above says it all. Gold is testing its technical support levels from mid-last year. Our Marketdoc Report on January 14th called for the breakdown after a Head-and-Shoulders top formation in the CBOE Gold Index. Our target remains around the 150 to 175 level on this index. The market is showing almost no concern about inflation. The dollar is strengthening. The economic recovery continues. Sorry goldbugs, we saw this one coming.

Check out our past issues of the Marketdoc Report. You too can learn to recognize important technical patterns to maximize your trading opportunities!

Gold Testing Support

This week gold continued its slide to test support levels in place since the middle of last year. We may see a "flight to gold" as protection against the rhetoric coming out of Washington to place restrictions on the banking industry. This political rhetoric is taken seriously enough as it may stall our economic recovery. Overall, I believe the decrease in gold is more related to the strengthening dollar. The next few weeks will tell if the slide in gold is only a pause before higher-highs or a reversal of its uptrend.

Around ten years ago gold traded for $250 an ounce and was declared "dead" as an investment by the financial media. No one wanted to buy gold. Now we see an endless loop of commercials urging us to invest in gold. Further evidence the contrarian theory of investing really works.

Note: The above is for information purposes only. Any decision to buy, sell, or hold a specific investment for a portfolio should be reviewed with your own personal investment advisor.

Haiti Disaster Effort

Two years ago I did some medical work in Haiti with an organization called Living Water Ministries of the Palm Beaches (LWM) which has a presence established in Northwest Haiti. In partnership with LWM and Vitamins for Life Haiti, we distributed over 80,000 vitamins to three villages over nine days. We actually did a medical clinic there almost two years ago to the the day of the earthquake.

With all of the devastation in Port-au-Prince LWM says they are expecting many to flee to the countryside where conditions are slightly better and where people may have relatives located there. As a result they are anticipating a drain on the food, water, and medical supplies which normally funnel into these villages. With Port-au-Prince devastated, they have lost a major supply route.

LWM is sending 12 sea containers which will be offloaded at a port along the coast, outside of Port-au-Prince. They have the manifests and paperwork channels already set up as they make shipments there regularly. As yet, they are not calling for volunteers as this would probably only add to the strain on limited supplies of food and water. They are taking donations on their website: www.lwmpb.org. Anyone wishing to make donations would be well served to donate to LWM.

The infrastructure prior to the earthquake was sketchy at best. Now it is nonexistent. Many personnel want to rush in to help but right now they may not be able to get alot done until the roads are cleared and some sort of large scale coordination plan is implemented. Much needed supplies are still bottled up at the airport. The seaport in Port-au-Prince is shut down.

There will be a need for volunteers and donations for many months, probably years, in Haiti. Although our initial instinct is to do something NOW, the reality is that help will be needed just as much in 1 - 12 months as it is now.
After hurricane Katrina hit the Mississippi/Louisiana coast many people went immediately to help. Four months after the landfall there was still no medical infrastructure in place, other than the free clinics staffed by volunteers from all over the country.

Think about what you can do now, but also think about what you can do in three months, six months, a year from now. The disaster in Haiti will not end any time soon.

Please pray for the disaster victims and relief workers.

Gold Ready to Break Down

The above chart of the CBOE Gold Index clearly illustrates a "Head and Shoulders Top" formation. This means we can expect gold to decline about the same distance from the right shoulder that we find between the neck and right shoulder. This places the index somewhere around the 150 level which is about a 20% correction in gold. Make no mistake. The run up in gold has more to do with the strength (or weakness) of the U.S. dollar more than anything else. Sure, the goldbugs will disagree with me on this one. However, the U.S. Dollar is inversely correlated with gold. As we continue to see the Dollar "reflate" we will see a decline in gold and other dollar-denominated assets. Sorry, goldbugs, I don't make up the rules.

Note: The above is for informational purposes only. Any decision to buy, sell, or hold a specific investment for your portfolio should be reviewed with your own personal financial advisor.

Watch the Bank Stock Index!!

We have been keeping a close watch over the Bank Stock Index (BKX.x) over these past few months. Each of the major stock indices has exceeded its 12-month high through December 2009. The BKX has yet to participate. The above chart shows that it may be getting ready to challenge its 2009 high.

Note: The above is for information purposes only. Any decision to buy, sell, or hold a specific investment for your portfolio should be discussed with your own personal investment advisor.