Mid-Year Market Analysis: Treasuries, Gold, Crude, Equities

Today is the last day of the first half of 2009, and today’s closes will set new monthly, quarterly and semiannual levels from my proprietary analytics. That’s tomorrow’s conversation. Today I look at the monthly charts for the 10-Year yield, Comex gold, Nymex crude oil and the S&P 500.

The yield of the 10-Year note has been in a down trend so far in the new millennium.

Down trend support is just below 5% with the five-month modified moving average as resistance at 3.25%.

Increasing supply of US Treasuries has been offsetting a flight to quality with the ticking of the national debt clock. This pattern will hold in the second half as the multi-year bear market returns for stocks.

The monthly chart for gold shows the numerous attempts to breakout above $1,000 the Troy ounce.

The peak was in March 2008, but monthly closes above my annual pivot at $891 keeps the breakout scenario in play.

A monthly close below $891 indicates risk to my annual support at $740 the Troy ounce.

Strength for gold signifies both a hedge against inflation and gold becoming the currency of last resort on dollar weakness. If you are in the “Green Shoot” economic recovery camp, gold is not for you.

The monthly chart for crude oil shows the parabolic peak of a year ago.

Oil peaked at $147.27 the barrel in July 2008 proving the $200 prediction from many to be wrong. On Fox Business Closing Bell I predicted $75 before $200 with oil around $125.

The high in July 2006 was $78.40, which should be the best case in July 2009, as a “Head and Shoulders Top” appears to be forming. In this case the head is a Dunce Cap.

When the January lows were set at $33.20 I predicted a rally to my annual resistances at $66.51 and $68.81. I expect my annual levels to be pivots and hence magnets in the second half of 2009.

The “green shooters” say that higher crude oil prices are a sign of economic recovery. That theory seems to be missing in the bidding for Iraqi oil fields today.

Here in Tampa Bay gasoline demand has been declining every month since the Recession began. My measure is the reported reduced traffic on the Interstate highways circling the bay area.

Finally, I evaluate the monthly and weekly charts for the S&P 500.

Those who know my work can acknowledge that in October 2007 I said “Beware of the Ides of October.”

In fact it was in March 2007 that I coined the phrase, “Goldilocks is Getting Wrinkles” and that was the reason I expected a bear market to be confirmed by the end of 2007.

Even though I say we remain in a multi-year bear market I predicted that the S&P 500 would rally 40% to 50% on March 6^, 2009. This was based on the up trend on the monthly chart and the 61.8% Fibonacci Retracement from the 1982 low to the 2007 high. The upside is the 38.2% retracement at 1,007.

My prediction remains that the highs will be confirmed between my annual pivot at 910.8 and my annual resistance at 967.1.

The weekly chart shows the multi-year bear market down trends. A weekly close below 910.8 with momentum declining below 80 would be my signal that the bear is on the prowl.

Disclosure: No positions in items discussed.

Comments

[basehitz:]

Richard,
Welcome to SA! I recall some remarkably accurate forecasts from you as we entered the cliff diving event last fall. Very nice work! I look forward to your future posts.

Jul 01 08:18 AM

[debw:]

Thank you so much for your wisdom !!!

Jul 01 11:16 AM

[starkoski:]

Richard,
Do you understand the concept of peak oil?? Have you factored any of its merit into your calculations? The decline rate of the world's oil fields is about 4 MBD/year and this will have the excess supply cleared out and demand exceeding supply very strongly in the next few years. Yes - oil price will go down as the markets correct but due to the structural decline curves and hyperinflation (monetary response) - oil is going to go way up in the future. Please comment on this.

Jul 01 07:10 PM