March 28th, 2004

Table of Contents:

(click on the numbered sections below and you wil be taken to that corresponding section)

1. Administrative:

2. General Market Analysis, and Commodities:

6. Metals (Gold / Silver):

1. Administrative Comments:

I Had some problems with my web software this evening and is the reason for the late newsletter. I use Adobe Go live to upload the website information, but it keeps crashing on me.

I have two computers: One is a fast and new, while the other one is a slow backup. Anyway, my main computer is down and will be fixed tomorrow, thus I'm using the slower computer, which sometimes has problems running the memory intensive Adobe Go Live program.

2. General Market Analysis and Commodities

Here's another way to technically look at the DOW; plotted relative to the EURO. Note how this chart also gave a sell signal in March after an uptrend support line was broken. Currently, the DOW has rallied back to retest this support line. Remember, in technical analysis, broken support often becomes resistance. I suspect this will happen once again and the DOW is about to enter another big fall.

The Nasdaq is in a strong downtrend with a series of lower highs and lows that began in late January.

Last week I stated that the Nasdaq looked like it could fall to support near the 200 MA, this is exactly what happened. Notice also how the major declines have occurred in increasing volume, which is bearish.

The major resistance is obviously the downtrend resistance line at about 2000. One could even argue that this pattern resembles a bullish flag. However, even if the downtrend line is broken, it will need to occur on high volume to mean anything. Also the 50 MA is now resistance.

Also remember that downtrends are defined by a series of lower highs, therefore the Nasdaq would have to break the previous high at about 2070 in order to break the downtrend and have a chance at starting a new uptrend.

Remember, any light volume rally is shortable. I think the Nasdaq has a good chance of seeing 1800 if the 200 MA is broken.

A 60 minute chart of the Nasdaq shows clear resistance near 2000, which was formerly support.

Just like the DOW Jones, the S&P 500 has broken the year long war rally uptrend line.

A closer look tells us that strong resistance exists at 1125 and the 50 MA, while supports lie at 1075 and the 200 MA. Once again, the recent decline occurred on high volume, thus the S&P will likely head lower over the next few weeks and a correction is firmly in place.

The OBV indicator will need to break the downtrend line in order for a meaningful rally to begin for S&P 500.

Adding more fuel to the Bearish side, is the fact that the NYSE index recently broke a year long uptrend support line and is currently retesting it on a light volume bounce.

The broken uptrend line is now resistance, and a fall to about 6100 is likely.

It's funny how Casinos do well when times look bad. Casinos historically do great during recessions (we are not in one yet). You'd think people would have better things to do, oh well...

In case you are just itching to short the market, the USPIX Profunds is a great mutual fund to do this with. A buy signal was generated when the USPIX break the 50 MA, however one might want to consider waiting for the 50 MA to cross up over the 200 MA to give a definate buy signal.

Note that the long term price target is in the low $40's, not a bad return on ones money if they can hold to fruition.

Let's look at a few market indicators:

The BPCOMPQ has finally broken its sideways consolidation rectangle pattern to the downside, thus indicating that more downside is coming. The next support is about 56, and the market has to fall a little further in order for the BPCOMPQ to reach this support level.

The BPCOMPQ is nearing a support level at about 56, and the possibility of a market bounce is likely near this support area. If 56 does not hold, then BPCOMPQ will likely fall to the high 40's, and would take a strong market pullback in order for this to occur.

Which one will happen? Not sure, keep a close eye on this chart as it should tell us very soon.

The NASI indicator gave a sell signal way back in late January which was right on the money. Currently I am still waiting for this indicator to give a buy signal. The NASI will not give a buy signal until the Stochastics cross back up over 20, currently it is pegged near zero.

Once the stochastics give a buy signal, the market should put on a meaningfull rally, though I doubt it will go to new highs.

Sectors:

The commodities index is in a secular bull market and is currently at levels not seen since 1983. This is just the beginning folks, the CRB will eventually go to the 300's and beyond and inflation will rear its ugly head in the US. ]

Commodities are raw materials, and raw materials are in a long term secular bull market. Don't listen to the lying politicians, logic dictates that if raw materials are going up, and all our goods are made from raw materials, then all the goods we buy have to go up as well.

Try this, if you have a spare million, buy commodities, such as gold, silver, palladium, and their respective stocks, as well as other commodity stocks, then simply turn off your computer. Five years later, turn your computer back on and you will be a very wealthy multi millionaire.

The big story around the water cooler continues to be the price of gasoline, which is strongly correlated with the price of crude oil. I can hardly go anywhere without someone discussing the high price of gasoline and how much money it now takes to fill up their car or truck.

Crude oil fell last week, however notice the strong uptrend support line as well as the hammer reversal candlestick.

Obviously, crude oil is at what we here like to call, a 'breakpoint' which is simply an important technical location on a stockchart. In other words, crude oil will either rally off this support line to new highs, or it will crash through this support area, thus ending its uptrend.

Personally, I think crude oil will bounce off this uptrend line rally up to $40 a barrel and beyond. If this happens, gasoline will also go much higher.

Long term chart which shows the significance of the $40 'Breakpoint'. I've been saying all along that if $40 is broken, that the price of crude oil could go through the roof. I feel like a broken record, however I think is such an important chart, as oil is the 'king' commodity and strongly affects inflation. If crude oil skyrockets, the government will no longer be able to manipulate the CPI statistics which currently show that inflation is very low.

OIH ETF has fallen to a support level and will likely begin another uptrend soon, especially if crude oil rallies of its uptrend line, as shown above.

The OIL major index has also fallen to a support area and looks like a good are to begin another rally. See the components noted on the chart box.

UTH is a slow moving ETF, but is a simply low risk way to take advantage of the commodities boom. Other TRF's that deal in commodities are XLU (another utilities index), and XLE (energy sector).

The steel sector is strong, as evident by the chart below. AKS looks great in this sector.

AKS looks great in the steel sector with resistance at $5.70

And finally one of my favorites, Palladium. Members of Breakpoint Trades were first informed of Palladium in late December 2003 just before it broke out of a large symmetrical triangle. Since that time, Palladium has taken off and has not only hit its first price target of $275, it is now half way to achieving its second price target in the $320s!

I think that Palladium's bull market has only just begun, whereas the bull market in gold is new several years old. Therefore, Palladium represents a ground floor opportunity in a young bull market.

The two main Palladium stocks are PAL and SWC, both are great long term holds.

SWC looks especially interesting for the long term, with long term price targets of $25 and $40.

Note how resistance at $14.60 has been taken out!

The India ETF looks interesting, especially if it breaks the downtrend line. I am looking to go long this ETF.

The Dollar has strong resistance at 90, and if this resistance can be broken, then a run to the 200 MA is likely. The Dollar could do anything here, it could begin another downtrend, or it could rally and take out resistance. However, even if resistance at 90 is take out, there is not much room until the next resistance at the 200 MA.