SP 500 and NDX December Futures Daily Charts

Gold Daily and Silver Weekly Charts

SP 500 and NDX December Futures Daily Charts: Possible Top in US Equities Coming

The inverse head and shoulder formation in the SP 500 has obviously 'worked' and is still active. The measuring objective is somewhere between here and 1245, possibly 1250, depending on where one marks the head and the neckline.  There is a similar formation as indicated in the NDX chart below.

If a decline does develop it could very well retest support at 1030, and close the gaps that were left on the way up. The signal that a top is in will be the confirmed break of the trendline.

We must remember that the Fed is in the markets and providing substatial monetization liquidity which can underpin financial assets at unnatural levels. The worst mistake I ever made in markets was underestimating the resolve of the Fed to create and support asset bubbles in the 2003-07 market rally. Charts are indicative of supply and demand levels. In the case of market interventions and the correction of long term distortions their effectiveness can be diminished.

But even the mighty Federal Reserve does not have perfect latitude to operate in the markets and determine their outcome. Charts are one method of obtaining insights into their success and failure and can be particularly effective when used with other, more fundamental, sources of information.

Very Long Term US Dollar Chart

The revaluation of the SDR should be occurring around the end of 2010. As you know it is composed of a valuation basket of currencies that is adjusted every five years. There has been a recent change in voting power in the IMF that may give more weight to the BRICs and those who favor a broader basket that includes gold and silver. India, China and Brazil Become Major Players in the IMF.  This is also of importance because we forecast that the SDR is going to be a likely candidate to supplant the Dollar as the world's reserve currency, a move that will be resisted and delayed by the Anglo-American financiers.

I do not know of any plans to change the valuation basket of the DX US dollar index. It is obviously out of date as the breakdown on the chart below shows. In previous postings of the very long term Dollar Chart I have warned that the projections may not be realized because the index is heavily weighted to the developed nations. 82 percent of the valuation is attributed to the euro, pound, and yen.