Constant Policy

Number to say this early Monday morning. I continue to like gold to the upside, silver to the upside and my sugar trade continues to roll breaking to new highs this morning. Meanwhile the gap up in the S&P was met with sellers overnight. Bonds have also creeped up towards the 132 level. Lastly, the is euro bouncing around generally been holding on to 134. Can anything great be taken from this action? Probably not but the few things remain constant.

First the S&P 500 was able to close above 1131. In terms of the monthly chart this is very important because it signifies the new high above June's high. Historically this implies that the bull market has resumed. Further with the S&P 500 closing in on 1150, a break above that level will argue for challenge of the highs from April at 1200. A break above the 1220 level argues that the 1300 level comes in to play. That level by the way is the level that is fair value for the S&P 500.

The second constant in this market is the metals rally. Gold looks like it's still targeting the 1350 to 1400 level. Silver looks like the most promising up the metals with the upside to the 2800 level still my target. I was a bit concerned about copper but it's break away from the 350s last week has relieved those concerns and now the targets look like 38 to 400. This move in copper by the way could be a leading indicator of industrial metals strength. Outperformance by a copper versus the S&P 500 could really send the US dollar downward.

Speaking of the US dollar, the fundamentals remain troubling to me. Growth is too slow. Revenue minus expenses on the governmental side is too negative. Regulation is getting in the way of capitalism. Policy from the White House is confusing. And going back to my industrial metals comment, if the industrial metals continue to outperform stocks, profit margins domestically will get squeezed and earnings will be squeezed because demand is just not strong enough to offset the fall in margins. Bottom-line we need clarity on policy; we need reduced regulation not increased; and we need to show the world that are banking system is the strongest. They should all lead to a stable dollar.