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0920 EST Monday March 06 2006

Good Morning: In spite of recent enthusiasm for the Semi-Conductor Index to break out to new multi-year highs, it was unable to do so Friday and as a consequence, with Intel INTC and other important Semi-Conductor issues effectively dragging down the Sox Index itself, at around 2 PM Friday, the markets knees just sort of turned to jelly as they gave back all the good work of the previous day, creating a technical outside day and week in the process, something that in analytical parlance is not a very encouraging sign, neither is the rather intense volatility that was also a feature most of the week. This can be a two way street, because a decisive break to the upside would in effect, negate all of the past week's action, however, on the other hand, a breakdown would tend to confirm, what has been creeping in as a possible negative reversal pattern, that in some respects has been pre-led by Intel INTC Ford F and GM's developing weakness, which is becoming more alarming as each week goes by. Although these are company specific weak spots, they do tend to represent important areas of the economy, just as the troubled Airline sector does as well but this should also send the new Fed Chairman a strong signal that his predecessor may have already gone too far and that a reprieve from Dr Ben can not only save the day, but could send the market north in a big way, if and when he finally gets the message, that enough is enough and has succeeded in pulling off a mid-decade slowdown...

The US Dollar was the other feature of the week which began to finally break down from a long consolidation above the 90 level on the $US Dollar index in what appears to be a developing head and shoulder's pattern, which in the event of a further decisive breakdown could really have devastating consequences for the US unit, but which might actually translate into positive consequences for both Stocks and Gold.

The Equity markets may have sold off some Friday, in advance of Geopolitical events this week that could potentially spook investors and also have them adding to their Gold and Silver positions. The decisive breakout on Silver last week was a watershed event in the history of the Precious Metals markets and while they may not be ready to respond immediately to such important developments the likelihood is very strong that they will in due time in very meaningful and dynamic ways and further declines in the $US Dollar would have to be helpful too.

As we suggested last week, the US Dollar was teetering on the brink of 90 on the Dollar Index and it would seem a decisive break either way could set the new trend... That trend broke sharply to the downside as we felt it likely would, paving the way for sharply lower levels...

Trade Well
From the Desk of Savant

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