Europe Becomes the Lever of the World

12/16/2011 10:30 am EST


Mary Anne & Pamela Aden

Co-Editors, The Aden Forecast

Sometimes you can be in the spotlight for all the wrong reasons, observe Mary Anne and Pamela Aden of The Aden Forecast.

It s all about Europe. It has been for a while...but now the Eurozone news is not only dominating, it has become the factor moving all of the markets

With the euro situation slowly deteriorating, the euro is falling sharply, reaching an 11-month low. And as it falls, the US dollar is surging, and it'll likely rise further.

The US dollar index, however, has major resistance at 81.30 and it'll probably stall at that level. Continue to keep your cash in US dollars, hold UUP, and avoid foreign currencies for now.

The metals and their shares also fell sharply this week—especially Wednesday, when gold dropped well below its September low. Silver fell to its February lows, while platinum reached a new low for the year.

The shares were also down, but the NYSE ARCA Gold Bugs Index (HUI) and PHLX Gold/Silver Sector Index (XAU) indices are still above their October lows.

This means a steeper D decline in gold is underway. That is, the decline since September is becoming a full-on D decline, which is the first in three years.

Gold is now approaching its key 65-week moving average. Gold could still decline further, to possibly test this major trend, and if it does this would be normal for a D-decline move. If gold tests its 65-week moving average near $1525, it would be a 20% decline.

We know this decline is unnerving, but keep focused on the big picture and hold your open positions. This is still the time to be buying and accumulating during weakness. Gold is moving opposite to the dollar, and as long as the dollar is strong, gold will likely stay under pressure.

Silver fell below $30, and it's oversold. Buy new positions now and on further weakness. Keep your current positions.

All commodities fell today. Oil declined from its highs, which was the last standout. It remains vulnerable, and copper is weak below $3.50. Stay out of resource and energy stocks until the dust settles.

US bonds are still benefiting as a safe haven as well. Yields declined this week as bond prices moved higher. Bonds will remain very strong as long as the 30-year yield stays below 3.03%.

Keep your US bonds and SPDR Barclays Capital Long Term Treasury ETF (TLO) for the time being, but don t buy new positions. Interest rates remain oversold, indicating rates could soon start moving up.

Euro woes are weighing on all of the global stock markets. Most of the US stock indices are technically bearish, and so are the international stock markets.

This bearish trend will be further reinforced if the Dow Industrials closes and stays below 11,760. Currently, risk is high, and we still recommend that you stay on the sidelines.

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