Stopped out of ARNA @ $4.00

S&P500 chart analysis

Is the rally that started in March a bear market rally or is it a real bull market that is here to continue?

On the weekly chart below, I am comparing the performance of the S&P500 index with the Shanghai composite index. The trend is clearly still up. And trend is ... your friend. So I'd rather stick with it than go against it by trying to guess where the top will be.


However, since the market started to rally last March, many so-called "gurus" and famous investors (Soros, Faber, Roubini, Tudor Jones, Prechter, Schiff and the likes) have issued warning signals about an imminent market reversal. Are they finally going to be right? Is this market reversal going to take place? Are we going to retest the March lows?

The bearish divergence between the MACD histogram and the S&P500 index is requiring us to be cautious, until the 1100 price level has been crossed to the upside.

Gold market: accident waiting to happen or crime scene?

Market analyst Paul Mylchreest, who wrote the 2006 report for Credit Agricole's Cheuvreux brokerage house concluding that the gold market was being manipulated surreptitiously by central banks and, the following year, a similar report for Redburn Partners, has revisited the gold market in a study for his own analysis service, the Thunder Road Report.

Mylchreest examines the gold traded in the world's biggest gold market, London, and concludes that either a tiny amount of real metal is supporting a spectacular volume of paper trades, "an accident waiting to happen," (Alternative 1) or else that the world's gold supply is spectacularly larger than officially acknowledged and the London gold market has been used in recent years to launder questionably obtained gold, perhaps the fabled "Yamashita's gold" plundered from Asia by the Japanese military during World War II, in which case the London gold market is a "crime scene" (Alternative 2).

The author writes:
- "It seems to me that an investigation into the gold market is justified. The Bank of England and the Financial Services Authority (FSA), which have some responsibility for overseeing the gold market in London, are probably the best placed institutions to carry this out."
- "Given that the outlook for most paper currencies is so dire, I don’t see the need to alter my portfolio weightings at this point whether Alternative 1 or Alternative 2 is correct. If it’s the latter, it just means the authorities can keep the fiat currency party going for longer, but eventually the party has to end. As I said in the last Thunder Road, “Defence is sometimes the best means of attack”, 90% of my portfolio is in gold, silver and food/agriculture related stocks at this point."

The full report is available by clicking here.

Source: Chris Powell, Gold Anti-Trust Action Committee, October 16, 2009.

Portfolio update

Buying today EWZ @ $71.65

I refer to my previous post regarding the Brazil ETF. The price is now in a sweet spot, i.e. between the 13 day and the 22 day moving average: good time to enter in a position.
Buying today @ $71.65 the iShares MSCI Brazil Index Fund ETF (ticker: EWZ) for a total of $10,000. Stop loss: $63
I plan to hold this ETF for the long term (several years).

Gold chart analysis

This is the weekly chart of gold from 2002 till today.

Gold last week went strongly up, way above the psychological level of $1000.

My gut feeling? gold will boost to $1300 in the next few months.
US dollar is losing its credibility as worldwide reserve currency. Central banks are divesting their dollars to have more euros and yen. China wants to get rid of its dollars. This will probably further contribute to the rise of the price of gold.

S&P500 chart analysis (SPY ETF)

Let's examine the weekly chart of the SPY ETF that tracks the S&P500 index:
1) the next main resistance level is around 1100-1120 : that corresponds to the 50% fibonacci ratio and also to the crossing of the main downtrend (orange line on the chart)
2) a close above that resistance level would be very bullish for the stock markets and start a new upleg
3) the Q3-2009 company results that will be announced in the next few weeks will probably give us a clue as to the next direction of the markets

Light crude oil chart analysis

Update on the price of light crude oil:
1) we're still in a sideways market since the trendline was broken in early September
2) focus on the reversal levels at $75-76 (go long) and $65-66 (short)
3) several missed attempts to go above the resistance at around $74

US Dollar index chart analysis

Let's examine the chart of the US dollar index:
1) trend still to the downside
2) 20 day moving average (DMA) still below 50 DMA
3) I would become bullish only if the 20 DMA crosses 50 DMA to the upside


If we zoom up, we can however see this special candlestick highlighted in yellow: buyers showed up at the 76 support. This might be a signal for a future reversal. However, as long as the two 20 and 50 daily moving averages do not cross, I will not enter in a bullish position.

Brazil iShares ETF (EWZ)

As you probably have heard, the Olympic Games will take place in Rio de Janeiro in 2016. This is another good news (among many others) for this country. It will mean lots of new infrastructure spending, which is good for real estate, construction, engineering and cement companies, hotels, tourism, but more generally for the whole brazilian economy as a whole.

In the past I bought the iShares MSCI Brazil Index Fund ETF (EWZ) for the portfolio at $46.6 on May 1 but sold it too early at $54 on June 15. This time, I want to buy it and go away, meaning hold it for several years.

I will now add EWZ again to the portfolio (allocation: 10% of total). I will buy around $68. My stop loss? $53.

Review of current positions in portfolio

Raise your stop loss for GLD from 94 to $96.5.




Raise your stop loss for FXA from $75 to $81.



The Brazilian Real has performed in an impressive way in line with the performance of the Brazilian stock market. Brazil recently announced that it will host the Olympics in 2016. Such event gives very positive signals for the Brazilian economy in the years to come.

Raise your stop loss for BZF from $21.5 to $23.

Portfolio update

Gold and silver prices went up strongly today, as well as Australian dollar and Brazilian real currency ETFs.
All contributed nicely to my return now reaching 15.1% since start on April 10, 2009.