Consider yourself warned of the possibility. Over the next few...

Consider yourself warned of the possibility. Over the next few weeks seriously consider how you can avoid the pain IF it does playout as below. Have a plan (seriously)and pay attention so that you recognise any warning signs. Don't make the same mistake as 08.


[8:00am ET] The US Dollar is at a crossroads, apparently in trouble. At 2:30am ET, the September Euro contract hit a high of 1.4266 against the Dollar before, I believe, the Fed came to the rescue. How many rescues are possible?

Today, the highly objective and independent technical analyst Colin Twiggs, who works in Australia, published the following summary:

Dollar Under Pressure: The US Dollar Index is testing primary support at 78.50; breakout would signal a primary decline with a target of 73*. Reversal above 0.81 is unlikely, but would test resistance from the March low at 83… The euro broke out above the recent triangle against the greenback, signaling a primary advance with a target of $1.50*. Follow-through above $1.43 would confirm the signal. Reversal below $1.38 is unlikely, but would warn of reversal to a primary down-trend.

I am on the record as saying I think the $USD will hold at this level for the short-term although – and this is quite connected -- $GOLD would make a run to close to $1,000. Here’s what I now think. President Obama’s healthcare legislation efforts lie in the balance; therefore, the Fed must keep rates down a while longer, but also continue to support the Dollar. The odds of a replay of Black Monday October 19, 1987 are rising.

If Obama fails with Healthcare, there is a better than even chance he will be considered a failed President; so the line in the sand is healthcare. It will come; the equity market will crash.

In the meantime, the Fed will either support the $USD and try to hold the price of gold from soaring or else Ben Bernanke will be forced to resign, replaced by Larry Summers. Bernanke looked confident this week, so I think he has agreed to play ball.

Ugly politics in Washington will lead to more volatility, but equities will stay in a trading range this summer. I don’t think we’ll be looking at S&P 1000 until 2010. The crash will come before then. There will be a couple months for the banks like Bank of America and Citigroup to get their financing in place. The warning bell was struck when Bernanke told Congress this week that commercial real estate would be a difficult challenge. This was a shot in the direction of the bank holding companies that hold asset backed securities.

With all the billions passed through from taxpayer to Goldman Sachs, the political card was played right before Bernanke took his trip to Congress when that firm announced the equity market was healthy and S&P 500 targets for 2009 and 2010 had been re-set much higher. So much for professionalism -- the politics of money rules America.

So bottom line; there will be some false break-downs in the US Dollar in the near-term, causing $GOLD to lift – one final time in this short- and intermediate-term cycle. The stock promoters will be active this summer. Their well-paid newsletter writers will come through with wonderful stories. The people will buy. $GOLD maybe hits $1,000, possibly a bit higher before the cycle ends abruptly.

To know when the gold cycle ends would require having an executive management chair in the boardrooms of JP Morgan and Goldman Sachs. From Washington to their ears through to the keystrokes on the prop desk will come the orders to load up on puts and to close the calls and off the stocks. I anticipate a rapid $200 drop in $GOLD will follow. Investors and traders will be stunned.

That will be the end of the dance for the S&P. People will start talking about 500 for the S&P 500, not 1000 or Goldman Sachs’ target for year-end 2009 of 1060 (upped on Monday from 940). I think the March low of S&P 666 will be tested, but probably will hold as the cycle bottom, thereby confirming March 2009 as the Bear market low. For $GOLD, I think that 780 will be the low, and in future, we are likely to see a convergence of higher $USD-higher $GOLD, which happens when interest rates rise, but before the economy reverts to 5th gear in cranking out real wealth.

These are my thoughts today. Since last Thursday in Havana I’ve had pain in my stomach, and now possibly we will share that pain. Of course, this is only one person’s view; I could be wrong.

July 23, 2009 by Bill Cara


Bill is also on record as saying after that gold heads north rapidly into the two thousands.





SP - Thanks for the sentiments. I was under quite the opposite impression.