Updates on Markets

By: John Lee | Mon, Jul 12, 2004
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This is a followup from the June 1st update.


The dollar has turned down again, having briefly crossed the 200 DMA. Before the election, there is no incentive for the administration to have a strong dollar as long as bonds hold ground. However judging by the Swiss Francs, the downside of the dollar may be limited.


30 year bonds crossed the 200DMA. I am netural on bonds. There are too many factors affecting it - The dollar, economic reports, inflation perception, central bank buying (domestic and foreign) to name a few.

Foreign Markets


Foreign markets are consolidating for a move. My gut feel is down.

US markets:

S&P 500 is above 200 DMA. The commercials are net short a measly 15,000 S&P contracts. I am only turning negative when S&P 500 breaches 200 DMA and commercials are net short 50,000+ contracts.


The 200 DMA should serve as a floor. I have a target of $420 within a month.

Gold Stocks

The chance of XAU re-testing 80 is low. Once we take out 96 (200 DMA), new high is within reach by the end of summer.


Inconclusive. Currency action and inflation perception will control oil price.


The two times that the ratio dipped below 10 (Oct 01 and Mar 03), XAU followed up by posting 80%+ gains in less than 7 month. The ratio (gold/crude oil) failed to cross the 11 resistance level but I expect the low of 9 to hold.


I am very bullish of silver. The last time the commercials had such a small short position (~60,000) was Oct 03, when silver started to make a run from $5 to over $8. We could be in for major fireworks this summer. Solid support for silver is at $5.5.


John Lee

Author: John Lee

John Lee, CFA
Executive Chairman,
Prophecy Development Corp.

John Lee, CFA is an accredited investor with over 2 decades of investing experience in metals and mining equities. Mr. Lee is the Chairman of Prophecy Development Corp (www.prophecydev.com). John Lee is a Rice University graduate with degrees in economics and engineering.

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