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Hey Traders,

On August 9, 2011, 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. No kidding Ben, welcome to the real world!

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 for 2 years.

What the chairman’s statement really meant to many traders, myself included, is that the US 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 13 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.

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 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.
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Here is an overview of the major markets.
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S&P 500
Monthly Trend = Negative
Weekly Trend = Negative
Daily Trend = Negative

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.
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SILVER (SPOT)
Monthly Trend = Positive
Weekly Trend = Negative
Daily Trend = Negative

Intermediate term traders should be on the sidelines and out of silver at the present time. OThe charts indicate more two-way market and a trading range.

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GOLD (SPOT)
Monthly Trend = Positive
Weekly Trend = Positive
Daily Trend = Positive

Short term, intermediate-term, and long-term traders should all remain long gold.

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CRUDE OIL (SEPTEMBER)
Monthly Trend = Negative
Weekly Trend = Negative
Daily Trend = Negative

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.

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DOLLAR INDEX
Monthly Trend = Positive
Weekly Trend = Negative
Daily Trend = Negative

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

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REUTERS/JEFFERIES CRB COMMODITY INDEX
Monthly Trend = Negative
Weekly Trend = Negative
Daily Trend = Negative

The trend for the REUTERS/JEFFERIES CRB COMMODITY INDEX remains negative. We want to watch this index very closely in the next 2 weeks, as we feel we’re very close to making a major cycle low in commodity prices.