Many think Europe’s past its problems and, therefore, so are the markets. I don’t think so. Not by a long shot.
To see why, you’ll want to listen to my comments and take a look at the charts I have for you this week.
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Good morning. This is Larry Edelson with my Uncommon Wisdom video market update for Monday, July 9.
There’s been quite a bit of action since I last sent you a video market update. Most of it, of course, the turbulence surrounding Europe and its sovereign-debt crisis.
There seems to be a new agreement in Europe that has caused some short-term rallies in the market. However, the latest agreement from Europe will probably fail, and fail rather soon, because there’s really no way the German citizens are also going to agree with Chancellor Merkel’s concession that Germany will share in European sovereign-debt liabilities and agree to directly fund banks.
There are a lot of big details about the latest agreement. In short, I don’t see it working out, and I do believe the recent downtrends that we’ve seen in most markets will soon resume.
Let’s now go to the charts.
Weekly chart of gold: You can see that gold made a low down at $1,522, $1,530 area, $1,545 support level. Then it rallied a bit on the news out of Europe a week and a half ago. And already that rally is starting to fade quite a bit.
It isn’t impossible that we could see gold move up — even test $1,700, but the downtrend remains intact, and the bias according to all of my signals remains on the downside for gold. I still believe quite strongly we’ll see a test of at least the $1,400 level in the weeks ahead.
Weekly chart of silver: Pretty much the same thing. We did fall the week before the latest European crisis meeting down below this uptrend line. After the news, silver rallied back up to test that line; it’s going to now kiss it good-bye.
And silver should fall quite sharply in the weeks ahead. It will remain prone to rally with some sharp, short-term snap-back rallies. But the overall trend for silver remains down on a short- and intermediate-term basis.
The U.S. Dollar: The dollar did correct a little bit and pull back. It’s holding support as you can see. Just before I started recording this video, the euro started to tank again. So I do expect a new rally in the dollar as the European crisis rolls on.
Dow Industrials: Holding firm, we’ve seen some pretty decent sell-offs here but snap-back rallies as well. That’s a testament to what I’ve been telling you all along: That long term, the Dow Industrials and S&P 500 remain in a very healthy long-term bull market.
However, it’s not ready to take off to the upside. I would not be surprised that we still see consolidation and a move down to 11,500, 11,000 in the Dow before we really take off to the upside.
So don’t go all in on the broader stock markets just yet. And certainly not in Europe. The only market that’s really buoyant right now is, surprisingly, the U.S. market, because it’s the recipient of so much cash coming out of European sovereign bonds and European markets that are looking for safe places to invest.
Naturally that money is largely going into the U.S. bond markets right now — from the frying pan into the fire, so to speak. But it is also going to U.S. stock markets, which is lending that long-term support to the Dow Industrials.
That’s it. Please stay tuned to all my writings and I’ll talk to you again soon.