Adam Hewison: An Extraordinary Admission Of Failure!

Yesterday, the chairman of the Federal Reserve, Ben Bernanke, acknowledged in what was perhaps the most stunning statement ever by a sitting chairman of the Fed…. That the economy was not doing as well as they had predicted.

Duh Ben, welcome to the real world!

In our comments yesterday before the chairman spoke, we hoped that the Fed wouldn’t do anything stupid like announce QE3 or that they will be dropping money from helicopters. Instead, the United States has just played its cards out to the world, saying that we are not going to be raising interest rates until………let me guess 2013, after the elections.

What the chairman’s statement really meant to many traders, myself included, is that the U.S. economy is not even halfway good. It is in the toilet! The Fed also stated in a very subtle way, that there is not going to be another huge bailout for the economy. That can only mean one thing in my mind, and that is the equity markets are going to continue to erode for the balance of 2011 and for most of 2012.

I suspect that we have seen a minor bottom in the equity markets as they have churned back and forth trying to stabilize after there disastrous losses in the past 12 days.

Everyone is euphoric about the price of crude oil coming down, but I suspect this is just going to be a correction in what will be a bull market when inflation kicks in. Other commodity markets are, in my opinion, getting closer and closer to making a bottom. I would pay particular attention to the Reuters/Jefferies CRB commodity index that we talk about every day on this blog.

Here’s what I think is going to happen in the next few days: I think we will see more choppy, irrational and erratic market behavior that will rule the day. I think that investors who haven’t been using a structured approach, like our “Trade Triangle” technology, are going to be scared to death at what is happening to their investment and will find them selves without a rudder in these tumultuous financial seas. Only by having a game plan in place, can you survive what I believe is going to happen in the future.

In a nutshell, the balance of 2011 and 2012, will be more about capital preservation and less about growth. The good news is, with our “Trade Triangle” technology we will continue to find winning trades and you will come out ahead of the game.

So let’s go to the 6 major markets we track every day and see how we can create and maintain your wealth in 2011.

S&P 500

Monthly Trade Triangles for Long Term Trends = Negative
Weekly Trade Triangles for Intermediate Term Trends = Negative
Daily Trade Triangles for Short Term Trends = Negative
Combined Strength of Trend Score = – 90

Chances are we reached an interim low point yesterday. The Fibonacci retracement zone has been satisfied and this market is in a heavily oversold condition. Continue to see choppy action overall for this index.

SILVER 

Monthly Trade Triangles for Long Term Trends = Positive
Weekly Trade Triangles for Intermediate Term Trends = Negative
Daily Trade Triangles for Short Term Trends = Negative
Combined Strength of Trend Score = – 60

Intermediate term traders should be on the sidelines and out of silver at the present time. Our -60 Chart Analysis Score indicates more two way market and a trading range.

GOLD 

Monthly Trade Triangles for Long Term Trends = Positive
Weekly Trade Triangles for Intermediate Term Trends = Positive
Daily Trade Triangles for Short Term Trends = Positive
Combined Strength of Trend Score = + 100

Short term, intermediate-term, and long-term traders should all remain long gold. We would use our Trade Triangles for exit points should they give signals. Is $1800 the next stop for gold.

CRUDE OIL 

Monthly Trade Triangles for Long Term Trends = Negative
Weekly Trade Triangles for Intermediate Term Trends = Negative
Daily Trade Triangles for Short Term Trends = Negative
Combined Strength of Trend Score = – 100

Yesterday the crude oil market looked like we have put in the bottom in this market for the time being. We would not be surprised to see further two way action and a further reflex rally.

DOLLAR INDEX

Monthly Trade Triangles for Long Term Trends = Positive
Weekly Trade Triangles for Intermediate Term Trends = Negative
Daily Trade Triangles for Short Term Trends = Negative
Combined Strength of Trend Score = + 60

The dollar index continues to remain in a broad trading range. The index remains below its 200 day moving average while our longer term Trade Triangle remains positive.

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