Critical Market Junctures

Posted by Peter Grandich -

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Gold – We need to watch gold closely as it’s at a critical junction. After getting above initial resistance around $1,350, it has wobbled at next key resistance around $1,425 – $1,450. It’s critical gold remain above the $1,350 area and eventually get above $1,450 to put a nail in the coffin of those who have tried to break its back and still are out there as we speak.

U.S. Stock Market – It’s been my belief for quite some time now that the U.S. stock market won’t see a major sell-off until such time the perception of the FED goes from being in front of the curve to behind. I suggested this could occur as fall took hold and the economy accelerates to the downside, causing any “tapering” to end and cries for more trillions to be created and thrown at the economy  increase.

Last Friday’s employment numbers are just another indicator that the U.S. economy is very weak despite trillions created to make it stronger and now shall also choke off real economic expansion thanks to a debt crisis that only gets bigger each day.

While the “Don’t Worry, Be Happy” crowd can spin “tapering” into a good thing for now, the weight of years of total fiscal mismanagement and a monetary policy gone wild is setting us up for yet another economic crisis that the those who normally bail it out will need a bail-out themselves.

I would use continued strength in U.S. equities to lower exposure greatly and limit my general equities holdings to companies outside the U.S.

U.S. Bonds – While we may see a respite to rising rates in the short term, the worse investment for the next decade remains just that.

U.S. Dollar – The trading range has become so tight that movements that in the past wouldn’t even batter an eye now cause long-winded responses. It’s kissing your sister until further notice.

Mining and Exploration Shares – While clearly off the bottom, the heavy damage from the worse bear market in my 30-year career still lingers – especially as one goes down the food chain to juniors. I don’t see how that changes until either gold gets above $1,550 or we officially have said good-bye to 2013.




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