Earlier this year in April, I projected that Gold would surpass $1,000 per troy oz. and reach a target of $1,200 later this year or by April of next year. Those targets are still on.

If you look at the chart for the gold ETF (GLD), you’ll see a strong uptrend that shows no sign of letting up. RSI continues to press above the 70% line, not signs of overbought but unrelenting breakout. Positive volume accumulation has increase over the past month.

It is not coincidental that the adjusted monetary base and banking reserves in the US banking system has broken onto a new uptrend around October (see the two charts below, courtesy of the Federal Reserve Bank of St. Louis).

Meanwhile, bank loans and credit continue to decline (chart below). The “juicing” of the monetary system so far has failed to stimulate economic growth. Other charts show that banks are not only not lending to businesses and customers, but are not lending to each other. We remain in a credit crunch.

The Quantity Theory of Money has been around since the Austrian School of Economics , and postulates that there is a direct relationship between the quantity of money and the prices of goods and services — in essence, too much money chasing too few goods. Anna Scwartz and Milton Friedman’s 1960’s study  entitled A Monetary History of the United States, 1867 – 1960 examined this relationship in detail. This founded the modern economic school of thought called Monetarism.

Gold serves three primary utilities: 1) it serves as a universal currency, 2) it serves as a store of value and hedge against inflation, 3) it serves as a precious commodity for personal (jewelry) and industrial usage (think gold plated conductors, etc). Any and all of these utilities are and will continue to support a higher gold in the future.

This morning, Bloomberg reports that the CPI released was higher than anticipated. Are you worried?

Have you bought your gold yet? It’s not overbought, even at today’s price.

On today’s Economic Calendar, we have the Producer Price Index at 8:30 AM, and Industrial Production at 9:15 AM. Neither of these is expected to cause any shocks to the market, as capacity utilization is not far off lows, and when combined with the PPI should give no signs of pending inflation.

Meanwhile, Gold continues to soar, whether due to safe haven bets, inflation fears, or physical utility as an industrial commodity or usage by cultures for jewelry. It’s important to note that it also has some seasonality, and now is the season. At $111.63, GLD is climbing toward my target of $120 that predicted earlier in the spring of this year when it crossed the $94 threshold. I can see that target taken out fairly quickly, perhaps by year-end.

My Chart Pattern Index is overwhelmingly bullish, with 95 % of NR 7 candle patterns showing bullish breakouts, and a large number (1,935) of patterns awaiting breakout.

On my best performing patterns for 11/16/09, the majority of patterns displayed are “Three Inside Up”, which are 65 % probability bullish reversals.

I’m seeing the bull continue. I have to admit, I have been unexpectedly cautious over the last several weeks, and I missed something very obvious on the SPX chart. I had warned of rising prices on declining volume, and had pointed out the declining daily volume bars on the chart. However, if you use On Balance volume, (see Wikipedia Definition), you can see the accumulation in volume is very positive and supports the run-up in price.

Oh well, it goes to show you, sometimes things which appear on charts as obvious may not be so obvious. So I’m adding On Balance Volume (OBV) to my daily charts in the future. I have always used OBV on my day trading screen , but it never occurred to me it would be useful on the daily charts. Now I know it is.

Nevertheless, I’m continuing my cautious stance on long positions, as @WeeklyTA has charted a rising broadening wedge in the SPX and DJIA.

I’m not taking on any new day trading positions now. My emerging markets swing trade choices have paid off very well, and mostly all are up about 6 % already. I am paper trading E-Mini futures (ES_F), for the next several weeks — I may start trading this depending on how my tutelage period goes. Right now, I like what I see with the potential.

Today looks up, as the SPX turned a white candlestick on Friday, fooling my forecast for a bearish day. The candlesticks forecast on 11/12/09 close was bearish, but we finished up for the day Friday. Today the forecast is bullish with a 50 count bullish engulfing patterns to 18 bearish engulfing patterns ratio.

The McClellan Oscillators were also tricked on 11/12 as they were showing a bearish zero line crossover, suggesting further downside. Today they are positively showing a positive zero line crossover.

If the SPX does turn up today as I expect, then a near term target of 1107 is in sight.

Further evidence of a positive weekly start is in the futures, as futures and world indices are up across the board. In overnight news, Japan posted better than expected GDP results.

Today we have retail sales (which are expected to be positive on the Clunker Program) and business inventories for our economic releases, and Ben Bernanke speaking at noon Eastern (Ben never disappoints).

But today could be a very interesting day, as Obama is in China, and China has made it very clear that they have no desire for a weak dollar. Will Ben say or imply something that may signal an intention to strengthen the dollar? How would the market react to this, as a weak dollar has historically positively impacted the US market?

My take on the US market is that it is struggling its best to maintain positive direction, but it is tired and topped. I think we may continue this sideways action for an extended period of time. The lack of volume is worrisome. I may be wrong, but I will not go long into any US stocks until I see more conviction in the market direction.

My portfolio is thriving on my emerging markets choices, while the trading portfolio (primarily domestic equities) is down a bit. On Friday I bought BEST at $1.60 (I had put in a limit buy) thinking I had a steal on my hands, but learned that the large sell-off on Friday was due to a very ugly 10K report that was released on Friday. I’ll watch closely today to see if Friday’s action was an overreaction. If the stock continues to sell off this morning, I’ll sell it and take a small loss.

After my missed Bullish/Bearish Candle forecast on Friday, I decided to benchmark it. I took the past 43 trading sessions for the S&P 500 and tallied the correct forecasts of the next day’s S&P500 close (29 correct forecasts) as a percentage of the total trading sessions (43 sessions) for an accuracy rate of 67.4%.  This is not bad – as an indicator, it  says that 67.4% of the time, if the indicator is bullish, the market will close up the following day, and it if it is bearish, there is a 67.4% probability that the market will close down the following  day. This is very helpful to me in deciding whether or not to enter into a trade.

This week I am paper trading E-mini futures, which appeal to me as a good day trading alternative to equities. If it looks like I can effectively trade these, then I’ll open an account and start day trading E-mini futures.

Futures currently positive at 8:13 AM, but today looks bearish to me. I’m particularly concerned about what looks like a topping process in the $SPX (See the chart below):

I could see as a possibility a pullback in the SPX to the 20 day moving or 50 day moving average range (the blue and red trend lines above).

My bearish engulfing to bullish engulfing pattern scan from yesterday’s close is strongly bearish, reading 25 bullish engulfing to 119 bearish engulfing candles for a .21 ratio. My Chart Pattern Indicator is also strongly bearish, showing a .34 bearish reading. Also important in the CPI is the large number (2,217) of patterns in consolidation awaiting a breakout. This could portend a strong reaction in the market, but it also could not develop — not really sure.  Further bear signals are evident in both the NYSE and NASDAQ McClellan Oscillators, which have re-trekked the zero line crossover.

Of course, major news and other events can override and take charge of the performance of the major indices. What needs to be examined is what is going on in the broader marketplace, and not the major indices, which can be manipulated  –

Today we have import and export prices at approximately 8:30 AM, and consumer sentiment at approximately 10 AM; today President Obama is visiting one of our major international financiers, Japan, as we have wrapped up our $40 bbn in Treasury Auctions this week.

It is possible we could start an up open and then tail off after 10 AM today – again, I can’t predict.  At any rate, I am not adding to my portfolio, but I’m looking to scour for some pullback opportunities — I have a limit buy order in for BEST at $1.60 to try to snag a bargain.

I’ll also review this morning the status of the emerging markets, which I believe are holding up somewhat better than the US market at the moment.

Good luck today.

My candle pattern index (chart below)suggests something big may be getting ready to happen, with a very large number of patterns in a consolidation range.

The $SPX continues its attempts to defy gravity, pushing ever so slightly higher against a line of resistance on lighter and lighter volume.

My trading portfolio has voted in the past few days, saying things are not as rosy as Mr Big Index says. As a matter of fact, I have become even more suspicious after reading a very interesting article on Futures Gunning that can manipulate the big indices (see Not So Paranoid Ramblings On Isolated Futures Gunning).

Perhaps I should keep two sets of indicators: 1) the big indices, and 2) the real world (for all the little people out there).

I had a friend who graduated from college a while back Cum Laude — I graduated, lawdy lawdy.

Did I say that “B” word, as in “BULL”, yesterday?  Just about every domestic equity in my trading portfolio was down yesterday, while the DOW posted a window dressing gain. The broader S&P and NASDAQ were also down.

Last night, my chart pattern scans turned up about the lowest number of breakout patterns since I have been running this scan (about 3 months). The market is as confused as I am.

Meanwhile, Geithner goes on record by saying a strong dollar is very important  to the U.S.

Strange timing, in light of the fact that we are putting another $40 – plus Billion in treasuries on the table with auctions this week. After this week, he’ll go back into hiding.

I’m expectantly suspicious — naturally I  think this rally is cooked up a little.

I just can’t believe market shorts are making any more money than I am right now. This market stinks. I have played high and tight flags very successfully since August — I haven’t seen a high and tight flag come through in a good while now. That tells me a lot about this market.

The only thing I would be long in now would  be emerging markets equities, and when I say long, I mean one to two months maybe. And I would watch those like a hawk and get out on the first signs of a top. Domestic equity trades? One to two days or so and then out.

Which is why I’m atteding the 3 Gurus Plus online options webinar three days this week, as well as studying Futures trading — I need more weapons in my arsenal during this unfulfillable market. I believe this sideways bull/bear action could continue for months or even years.

What is eating at me at the moment is the trending lack of breadth and conviction in this latest bull rally. Anything could derail it at any moment.

Futures are up now, as well as positive overseas results, so let’s see what happens today.

Good Morning! It looks like we might be off to a slightly downward start at open this morning, with futures down and international markets mixed at 5:17 AM. This is supported by my 23 to 35 bullish to bearish candle indicator. However, don’t let that discourage, I have scoured the market summaries, oscillators, and bullish percent indices, and I see a strong bullish trend in the market as of now.

Remember, yesterday I said something big was getting ready to happen, and I thought it would probably be bullish. Well, yesterday we had a convincing healthy increase of over 2% in all the major indices across the board.

All major US sectors were up in the bullish percent index (BPI) readings except energy. In particular, the NASDAQ (59.21%), Consumer Discretionary, (61.92%) and Finance (64.56%)  each showed healthy BPI ranges below 70% (meaning they are not pressing upper bounds for a possible reversal).

Yesterday, we had 423 bullish MACD crossovers to 16 bearish MACD crossovers. A bullish MACD crossover often signals further appreciation.

Further supporting evidence comes from my chart pattern index (CPI) showing 95% bullish, with high reading of 1,707 NR7 patterns (seven day tight range trading patterns) waiting to breakout.

Just a little more optimism: yesterday the VIX declined 4.3 %, and the VIX and S&P often move in opposite directions. Furthermore, the McClellan Oscillator is the healthiest looking that I have seen it for a while (see the chart below):

Yesterday we  had 1054 to 68 parabolic SAR buy signals registered . If you are not familiar with this indicator, you may want to familiarize, it could help you chart your entry and exit points for stocks if you employed it properly.

Developed by Welles Wilder, the creator of RSI and DMI, the Parabolic SAR sets trailing price stops for long or short positions.

It is also referred to as the stop-and-reversal indicator. SAR is more popular for setting stops than for establishing direction or trend.

If the trend is up, you should buy when the indicator moves below the price. If the trend is down, then you should sell when the indicator moves above the price. Wilder recommended establishing the trend first, and then trading with Parabolic SAR in the direction of the trend.

Here is an example of a parabolic SAR below:

Parabolic SAR indicators are showing that just about all the major international markets are a buy now. I look at this as a healthy indicator for the US market, since it is my conviction that the US will follow these markets into further recovery (sorry, it’s no longer the world leader it once was).

All of the international ISHARES  (see chart below) had parabolic SAR buy signals yesterday:

If you want further evidence I could show you candle glance charts of all the major international markets, showing all international markets/exchanges except the NIKKEI have bounced back above their 20 and 50 day moving average trend lines.

Talk of international bubbles persists, and I’m monitoring, but I don’t see that as a threat as of now.

It’s getting to be winter; the bears need to hibernate for a while.

Good Morning! As I wake up with a cold this Monday morning, it’s extremely bullish out there. Last week the market shucked off a surprisingly high 10.2 % unemployment rate reading on Friday, and then threw us a curve ball by finishing up, as I implied it might. The S&P continues higher on a declining rate of  volume. There is little news on the economic releases, other than the Treasury auctions this week.

As of 7:33 AM, DOW futures are up 94 points, and international markets and futures are up across the globe.

I’m presently in Gold (GLD), I’m in oil (DBO) I’m in international emerging markets bonds (FNMIX), and international emerging markets equities (VEU,EEB,IDX,VGTSX,), and I’m even playing the fixed income stream (remember I’m old) with some bond and TIPS funds (PTRAX, VFICX, VIPSX). Please don’t raz me because of the choice of institutional funds — some of these are in 401K’s that have very limited fund choices. I’m not buying the international “bubble” theory for now; you have to remember where we’ve come from. However, if it appears we are going to have an international bubble, I’ll move out quickly.

The only domestic equities I own are in my day trading account, so you kind of understand my biases at the moment. I think my attitude toward US equities is being tainted by the present actions of Congress. My background is in monetary theory, so I have a tendency to look a little further out on the horizon at times, as opposed to just reading the current charts. And I don’t like what I see coming in the future with the dollar and inflation. But that’s down the road.

My Candle Pattern Index suggests to me that something big is getting ready to happen, with over 1800 equities consolidating for a NR7 pattern breakout – this is the largest reading this year. Right now, it looks to the upside, since the trend is your friend.  But it could just as easily take a turn to the downside — always keep in mind there’s no limit to the amount of curve balls the market can throw. That light volume on the S&P is worrying me.

Market candle scans from Friday read 46 to 8 bullish engulfing to bearish engulfing patterns, again suggesting a bullish day, albeit a little light in the strength reading.

So let’s have a bull day, and play the tapes and tune out all the other stuff. No new day trades for me as of right now, but I’ll add (and post) as I see opportunities arise.

10.2% — wow. This is higher than consensus estimates of unemployment 0f 9.9% to 10.1%. I can’t image the market today taking this as a positive sign, perhaps another big selloff Friday.

However, the market has been known to throw a curve ball quite often, so I’ll stay away from making predictions. Yesterday I forecast a flat day and it was up 200 points, today who knows.

I am glad I have been actively entering the emerging markets, I am well positioned. I have no problem saying that our economy is struggling and its time our elected officials address it. They have had their heads buried in sand.

I have never been a believer of de-coupling, but it’s obvious to me now that the US has become the “bastard child” of this global recovery.

I am holding a day trade, KFN that I bought 2 days ago, currently up 12.6 % from 5.06 cost. I’ll sell immediately if the profit is not erased in pre-market.

I have a limit order in for IDX at 58.23, an Indonesia ETF – the buy point is close to 50 day MA. No Domestic equities for me, other than sporadic day trades here or there.

Interesting times we live in.

Good news chart-wise? It looks like the DOW has put in a short term bottom, let’s see if it can hold.

As of 8:00 AM this morning, futures are very slightly up with down overnight markets across the globe. I can envision a slope upward in the market this AM for the first 30 minutes, followed by a tail down for the rest of the day. I don’t see any positive momentum in the market now. And I believe there is an unemployment report tomorrow, and the consensus range is 9.9% to 10.1%. The 10% number is purely psychological, everyone knows we are going to hit it, but it’s psychological nevertheless. Just like the DOW 10,000, Gold at 1,000, that number has a profound impact on our subtle market actions. Even if the unemployment number surprises positively, then we could have a good finish on the week, but I’m not sure how far forward that impetus would carry us. If it surprises negatively, I could see a big ugly sell-off tomorrow.

Yesterday, on FOMC day, the DOW closed up only .31 %. The DOW ranged 9928-9767 for the day (+1.65%). It’s not what I would call a whipsaw day, but just an ugly double top day artificially propped by some media speculation. This was a great opportunity day for the DOW to turn itself around and it didn’t. I would be more cautious going forward.

The broader indices actually looked more ugly, with NASDAQ down .9% and S&P up only .10%

The bottom line — if you bought and held yesterday, you would have been lucky to show any gains at the end of a very much media hyped day. This has pretty much been the daily story for the last month. We have had a disappointing October earnings season. It started off with a bang and went out with a whimper. This is despite mostly positive earnings reports all month long. My forecast of a great October didn’t materialize. Any amount of media hype is not sustaining this market.

I could go into detail about the McClellan Oscillators, but suffice it to say they don’t look encouraging either.

My Candle Pattern Index shows 12 bearish sessions since the top on 10/19; It’s still bearish, though a little less bearish than the day before. More importantly, a very large number of patterns are awaiting breakout – either up or down. It’s still possible that we could turn up from here, although my gut feel doesn’t support that thesis.

I can easily see the current rally attempt failing and the DOW falling another 3% or so to 9500.

On a more positive front, yesterday I bought the EEB ETF (emerging BRIC), and DBO (double crude oil), to play current trends. EEB is an IRA play, and DBO is a short-term oil (and weak dollar) play. I also covered my short on DTG for small loss.

Good luck today.