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0920 EST Friday March 24 2006

Good Morning: A few days ago we commented on the outsized premium in Crude Oil as the April 06 contract expired around $60.50 per barrel and was replaced by the May contract at almost a $2 premium. A somewhat rare, if not unprecedented occurrence compared with much of what happened last year and we stated we would need to watch this sector very carefully for signs of latent emerging bullishness.

As it turns out, we did not have to wait too long for the impact of these premiums to manifest, as yesterday Crude soared once again along with Natural Gas, Heating Oil and Gasoline in one of the strongest showings in a while and this raises the specter, that there is a sharply increasing risk of an upside breakout in the Oil complex later this year, which could also be helpful to precious metals as it would likely be quite inflationary. In tandem with Crude's rise, Silver soared once again to new 23 year highs reaching $10.70 and Copper set new all time record highs at $2.40. Now comes news of some impending steel price hikes and the metals sector remains exceptionally firm across all.
The mosaic of recommendations of between $650 and $850 for Gold, by an increasing number of Brokerage House, Investment Banking Institutions such as Merrill Lynch now topping the list at the higher end of expectations for the Institutions makes a compelling case for the yellow metal to move sharply higher as we outlined yesterday, that it might start doing that soon and accelerate higher in April thru June...

Meanwhile the US Dollar continued to firm and once again is not so far from its highs of the past two years, but is now approaching a fairly critical level that could decide whether this is the Dollar's last stand, or whether we are in a whole new bull leg for the US unit. Actually it would seem to us, that were it to break down from here, that could be it for a very long time. So, as we approach the end of the quarter, this is something we will have to be on the lookout for.

Equities were a little disappointing Thursday as they suffered a modest pullback yet again, after probing new highs Wednesday. This is very characteristic of bull market moves, although the 100 point haircut in the Transportation Index from its new record high, may have set things back for a while and is something we warned against, that the Transports shooting for 5,000 or the Dow for new all time record highs might not be such a walk in the park and could actually take longer than expected. Still there is always the possibility Equities can easily get back on track and resume their uptrends, but this is something that is quite important going forward, especially into the end of this quarter, as further downward activity towards month's end, could be detrimental to this major secular uptrend, at least in the short term.

Trade Well
From the Desk of Savant

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