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WEEKLY CHARTS
with some thoughts on indices, US dollar, Gold and HUI

DJIA:   If the 9900-9925 support zone doesn't hold it, the next two downside targets are 9850, and 9600/9550.

DJTI:  The index closed below short term support, but it is above intermediate term channel support. On balance, the action of this Index is still bullish.

SP500:   If the 1085-1075 support zone doesn't hold it, the next downside target is the 1065-1059 zone.

NASDAQ: If the 1850-1840 support zone doesn't hold it, the next downside target is the 1790-1780 zone.

HUI: Resistance at 205, and at 216. Support at 176, at 164, and at 155. If it closes above 216, it will negate the previous violation of the up-trend and the entire action of the past seven weeks will turn out to a "bear trap." A close below 155 would set off a downside target of 141.

US Dollar:  Resistance at 90, support at  87 and 85. If it closes above 90, it can rally to 95. If it closes below 85, it can fall to 80.

SUMMARY

We believe that  the  U.S. dollar and gold are poised to experience dramatic moves over the next 2-3 weeks,  providing great trading opportunities.

We envision two scenarios. In the first one, the dollar makes a double bottom and stages a dramatic rally breaking above the 3-year downtrend, while gold and gold stocks get decimated. In that case we would expect some backing a filling this week and break-out above 90 in the dollar index late in the week or in the week after.

If the dollar index closes convincingly above 90, you don't want to own gold stocks in the near term, or bonds, or housing stocks. They are all gong down in flames and in fact you want to be short all of them. So, the 90 level is the line in the sand, if the dollar index breaks above, start taking pilot short positions in gold stocks, housing stocks, and bonds.

In scenario #2, the dollar index does some backing and filling below the 90 level, but it fails to penetrate it and instead it turns down and closes below 87, activating a head and shoulders pattern, which would give a downside objective in the $78-80% zone. In that case, the place to be is GOLD/GOLD STOCKS, BONDS, and HOUSING STOCKS. They will be on fire.

Therefore if the dollar index appears to have trouble getting thru the 90 level in its SECOND try, open small  (10%-15%) pilot ling positions in all three of the above and move up to 100%, on a break and close below 87 for the dollar index. 

The dollar should back and fill between 87.65 and 89 for a few days before it attempts to take out the 90 level for real. Once the 90 level is taken out, look for a quick rally to 92.5. We want to watch out for a repeat of what happened in October (see rectangle) The rally was a fake out. It turned down and went on to make lower lows. If that is to happen, look early in the week for an advance up to just below the 90 level and then 3-4 days of  hanging around, without being able to close above 90. Finally it will backing off by Friday or by Monday-Tuesday of the following week and then it will just fall apart.

While the dollar backs and fills, gold may rally up to the 396 level and then if the dollar breaks above 90, expect gold to fall back to 370. When the dollar closes above 92.5, gold will violate 370 and it will go down to 340-320.  If the dollar fails to close above 90, expect gold to stabilize between 396 and 380 and then when the dollar closes below 87, gold will reverse violently, forming a double bottom and in a matter of 2-3 days, it will close above 410.

The above charts are courtesy of  Stockcharts.com.

While the  dollar backs and fills and gold does its own little dance, the HUI may rally up to the 190 level and then if the dollar breaks above 90 and gold below 370, expect the HUI to fall back to 175-172. When the dollar closes above 92.5 and gold violates 370, the HUI will go down to 164-155. If the dollar fails to close above 90, and gold stabilizes between 396 and 380, the HUI ought to stay between 190 and 180. When the dollar closes below 87, and gold reverses violently forming a double bottom, the HUI should act in a similar manner and in a matter of 2-3 days. It should close above 205.

Ike Iossif

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