Gold Breaks Out On Weak Dollar

The Euro broke out in a big way yesterday, and gold responded in kind. Inflation is a big driving force in the commodities sectors and a strong bull market in those sectors is once again reasserting itself.

Jesse Livermore once remarked that his biggest mistake was becoming bearish on the entire market when 2-3 sectors were broken down. This is a good lesson to pay attention to here. While the broad market is in a confirmed bear market, the oils, metals, and ag are all in strong up trends and there is no sign that these trends will let up any time soon.

While the SPY is in a slightly bullish up tick, it gives the bull market in commodities virtually no headwind to fly into.

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Outlook:

The SPY followed through yesterday while the QQQQ remains stuck below resistance. We continue to look for meaningful follow through. That said, the market's near term trend is up and pullbacks should be buying opportunities until the SPY tags overhead resistance at its 50-week average.

*Stick to inflationary sectors such as oil and metals.