Below is the AUDUSD weekly chart I'm watching closely. I'll re-evaluate if we can get a break above the two week high of .9327, or if we get a pullback on the hammer down to around .9050, where the 5 EMA on the weekly chart is.

I'm also watching $1050 price level on gold. When AUDUSD breaks above 9327, I'd like to see gold above $1,050.

Just a quick note I wanted to make about what I am thinking in preparation for October -- a month notorious for volatility and market crashes.

1. Currently, I'm still long gold, silver, and the Australian dollar against the USD (trades documented in my trade journal). These trades have been working out very well for me. Regardless of what happens in October, I'm confident about them.
2. We're coming up on the 50% retracement level from the US equities crash in October 2008 (as noted in this recommended video and dicussion). This will be a key break or bounce level, in my opinion. Look for the 50% level on both the S&P 500 and the DJIA.
3. Non-US equities, in my opinion, remain safer than US equities. Many non-US equities have rallied more so than US equities.
4. If the market crashes, which I think is more likely than a break above the 50% level (of course we would want to look at other technical indicators if/when the market reaches the 50% level), will the dollar rally as well? That is what we saw in 2008. However at some point the market will not be able to buy US dollars, especially with the Fed continuing to print more money. So, if US equities crash, we will see a flight to safety -- though I think it's still unclear whether safety means US dollars (like it did in 2008) or if it means something else, particularly gold and silver.
5. I'm long gold and silver, but I will be looking to exit some of my positions if gold breaks below $980/oz (see previous analysis of gold).
6. MZM, one of my favorite money supply indicators, turned deflationary this past month (meaning it declined). The last time this occurred was right before the crash of '08. MZM tends to be very well-correlated with the US dollar over the long run. The trend on MZM is still upwards, but the recent dip suggests we may get a dollar rally of some kind.
7. Conclusion: $980 is a key level on gold that I'm watching. At this point I think a dollar rally in October is a bit more likely, but of course I will let the charts tell me what is happening. Overall I remain quite confident that the major trends in the marketplace continue to exist and so I will be looking at a potential rally in the US dollar as an opportunity to short it from a higher level.

Disclosure: Long gold, silver, Australian dollar. Short US dollar.

Tenet Healthcare (THC), a publicly traded company focused on providing quality healthcare via hospitals, has been on a tear this year. Its stock price has risen by over 300%, and the trend is clearly upwards. The rise in price may be partially attributable to improvement's in the company's financials: while the company did post a loss in the second quarter of 2009, its revenue continues to grow. Moreover, if discontinued operations were excluded from financials, the company would be profitable. This suggests the company may be on the right track.

Economic woes, however, affect all industries -- including healthcare. Will the Obama plan for creating more health insurance options help companies like THC? Perhaps, although government handouts typically come at the expense of greater regulatory scrutiny. Government handouts also increase the likelihood that political connections will impact how regulations are structured. Given that Tenet Healthcare has not been the best friend of the US government -- in 2006, the company settled on charges that it was overcharging the US federal government for Medicare expenses, paying $725 million in cash to the government while foregoing an additional $175 million in fees -- the company may not have the political connections needed to get the most out of proposed government-led healthcare reforms. Moreover, Trevor Fetter, CEO of THC, has expressed skepticism towards the Obama administration's healthcare plans, suggesting that hospitals will be forced to bear too much of the burden.

Here are six things I'm personally keeping an eye on to gauge the direction of the price of gold:

1. COT report. This report shows that commercial traders -- generally believed to be "smart money" traders involved in day-to-day operations of the commodity in question -- are short gold. The commercial traders are increasingly short while others are increasingly long; in such a scenario, when the non-commercials run out of fuel in their trend, they will start liquidating, and the commercials can see this as an opportunity to add to their short positions and push the market further down.

Should the bear market in US equities resume in the coming months, which I think it will, Bank of America (BAC) may be an excellent shorting opportunity. Here's why:

1. The stock has a beta of 2.41 -- quite high. High beta stocks will be appealing to short for those who are very confident in a forthcoming bear market, as a higher beta suggests greater volatility and a more powerful move in the direction of the overall market trend.
2. A P/E ratio of 38.18, more than twice that of the S&P 500, seems a bit excessive in my opinion -- doubly so when one considers that BAC is a mature company in a troubled industry (banking). Based on P/E ratio alone, I would expect price to fall by 50%.
3. The technicals are particularly appealing, in my opinion. Below is a daily chart. Note the RSI divergence -- prices make new highs, but RSI does not. This suggests the uptrend is running out of strength. We also see a doji and an inverted hammer in the last two candles -- this fact, coupled with the rangebound price action, also suggest the uptrend is running out.

Yesterday's sharp drop in US equities has permabears asking: has the next leg down for US equities begun?

With that in mind, here's a look at the case for shorting Google (GOOG).

Let's start with the technical argument. Below is the weekly chart; note the evening star reversal pattern.

click to enlarge

The US dollar has been strengthening over the past few days, causing many forex traders to ask: will it last?

Those looking to trade US Dollar weakness against the Euro may wish to wait a bit, as EURUSD is approaching strong resistance near the 1.4000 level on the daily and weekly chart. The chart below, courtesy of forex trader Dave T, illustrates.

Let's take a look at the logic behind the case for a surge upwards in the price of gold:

1. First is the long-term trend in gold, going back to around 1999 -- the monthly chart below illustrates.

As a permabear, my natural inclination is to be bearish on US equities. However, even hardcore permabears like myself are forced to acknowledge an uptrend, and clearly an uptrend exists on the S&P. Below is a weekly chart of SPY, an ETF that tracks the S&P 500. Since March of 2009, we've been in a clear uptrend.

However, let's look at some arguments why it may not last:

A short-term EURGBP opportunity appears to be forming, according to forex trader Dave T. The chart below illustrates the technical rationale for entering a short position at near the .8585 level.

click to enlarge

The case for a severe weakening, and perhaps even total collapse, of the US dollar is something I've been making for some time here on SeekingAlpha and on my blog. As the dollar has begun experiencing some deeper bouts of weakness and has given back all of its gains since October 2008, I wanted to step back and take a big picture look at where we are on the path to dollar collapse -- and re-evaluate whether or not we will stay on this path.

The first big picture event we should look at is the price of gold. A new bull market in gold began in 2001. This is a long-term trend, I believe the next leg of this trend will start shortly.

As I've blogged many times before, I view the Federal Reserve, the semi-governmental organization that manages the value of the US dollar, as having an inflationary bias, and that they will be able to create the inflation they so desire. I look for trading opportunities consistent with this perspective.

While opportunities have been a bit sparse for dollar permabears like myself in 2009, there are signs that this is coming to an end, and that dollar weakness/price inflation may be set to accelerate. Consider the evidence:

All may seem calm to the casual observer, and there may even be indications of a recovery: the Dow and S&P have outperformed Treasury bonds and precious metals, and the dollar has remained stable. Is this the beginning of a new bull market? Is it time for permabears to pack it up and go home? The chart below illustrates the situation.

With gold falling below $900, many perma bears and gold bugs are asking: what's going on here?

Let's start with the chart below, which shows the past four years of gold's price history. The first level at which I'd look to re-evaluate conditions is $770, which is clearly a pivot point and is also where the 38.2% Fibonacci line is at for the gold rally from $400 to over $1,000.

As most of us who have been watching the financial markets know, last week was quite a week. The Federal Reserve announced they would print money to buy Treasuries and mortgage-backed securities.

The Committee decided today to increase the size of the Federal Reserve’s balance sheet further by purchasing up to an additional $750 billion of agency mortgage-backed securities, bringing its total purchases of these securities to up to $1.25 trillion this year, and to increase its purchases of agency debt this year by up to $100 billion to a total of up to $200 billion. Moreover, to help improve conditions in private credit markets, the Committee decided to purchase up to $300 billion of longer-term Treasury securities over the next six months.

One of my favorite currencies on a three year outlook is the Australian dollar. There are three reasons for this:

1. In light of the increase in US government spending and the diminishing tax base, I think substantial dollar devaluation is likely over the next 3-4 years. This increases pressure to "decouple" -- specifically for China to discontinue buying US Treasury bonds, and to invest that capital into its own economy, which it has been doing. As China invests more in its own domestic economy, it will boost the economies of geographically related countries that can export necessary commodities to China. That's where Australia comes in.
2. Australia's central bank, the Reserve Bank of Australia, currently has an interest rate target of 3.25%. In a world where zero percent interest rates are becoming the norm, this is quite appealing, and may attract capital that is seeking the security and liquidity of a currency but with an interest rate yield as well. Put another way, the Australian dollar could be the new carry trade.
3. The Australian economy has, at least for now, remained relatively unscathed by the global economic crisis. In Australia, wages are up, business investments are up, retail sales are increasing the housing sector is expanding, and the country si running a trade surplus.

In light of the aforementioned, the Australian Dollar seems like a viable long-term alternative to the British pound and the US dollar. Trading the Australian Dollar Personally I've been riding the recent short-term rally in AUDJPY (Australian dollar against the Japanese yen), though price action is suggesting this rally may be out of steam in the short-term. Patient traders, though, may wish to keep an eye on AUDUSD and look to enter as momentum turns upwards. The chart below illustrates key price points that can serve as areas where prices may consolidate -- and thus where traders can look to enter or exit positions.

Recently there has been an increase in expectations of hyperinflation in the US in some schools of economic thought, as the notion that the ongoing stimulus packages, coupled with the declining tax base, could lead to a loss of confidence in the US dollar. In this post I'll attempt to provide a quick breakdown of hyperinflation -- what it is, how it can happen, and how to trade it.

What is hyperinflation?

Hyperinflation is when the rate of inflation is 40%+ per year. One of its most important characteristics is a breakdown in commerce; i.e. a return to barter, and a reluctance to take on financial assets.

Well, gold bugs around the world have been having a good chuckle of late, as the market is re-affirming the often eccentric and practically religious views of gold bugs: gold is up over 11% for the year in US dollars, and up over 4% over just the past five trading days. Which begs the question: why? There are a few possible answers to this question:

1. Deflation. This crisis is global, and everyone is flying to safe stores of wealth. Over the big picture of human history, gold has served as the best store of wealth -- and thus gold is rising. In many ways this is the classic "gold is money" argument, one typically championed by Austrian economists. Robert Blumen has offered an excellent explanation of this argument.

Last time, we talked about how we can look at the actions of central planners to understand where asset bubbles will be created. In this post, we'll talk about the specific ways this can be traded.

Bubbles Benefit from Active Trading