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Message: Louise Yamada on gold

With tremendous volatility in gold, silver, crude oil and stocks, King World News interviewed legendary technical analyst, Louise Yamada, of LYA Advisors, to see where she sees the markets headed. Louise not only discussed the key markets, but also surprised KWN by stating that companies are leaving China and coming home. She also had some interesting comments regarding the Nikkei: “Japan looks interesting. It might be establishing the bottom of a ten year base. There has been an impressive breakdown in the yen and the Japanese are starting to print money.”

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Louise Yamada continues:

“You can contrast the Nikkei with the Chinese market which is breaking down. China has been in a downtrend for a couple of years. All of that time where people were talking up China, the market wasn’t doing all that well and it has been continuing to deteriorate. China is one of the weaker global markets.

One of the interesting things about China is a lot of the US companies are getting discouraged and they are starting to come back home. That’s very exciting. Companies are also seeing the tremendous disparity in natural gas costs and realizing they can save an enormous amount of money by setting up here in the US again.”

When asked about the stock market, Yamada responded, “The market has been going up quite nicely and the question is how much of it is liquidity induced? Some minor divergences are starting to come in at this point, such as the up/down volume, which has a lower high. These are things one has to watch, but some of those divergences can go on for a period of time.

As we’ve noticed thus far, nothing has gone into the oversold readings and that is when things become risky. Yes the market is thinning out, but select stocks continue to be in uptrends. Frankly I would like to see a pause....

“We had a strong first quarter and now we will see if we get some further divergences which suggests some type of a setback. At the moment, any 10% pullback is considered a consolidation and might be quite healthy.

The S&P and the Dow had been inching into 2007 resistance, prior to this decline. The Nasdaq, of course, broke out from a ten or eleven year base and pushed through the 2007 resistance. The Nasdaq looks to us like a new structural bull market.

I think this is exciting because the relative strength for the technology group broke out in 2009, when we wrote a big piece suggesting technology could now be considered structural leadership. It’s not just Apple that has taken the Nasdaq higher, other leaders have been advancing as well.”

When asked about crude oil, Yamada stated, “The WTI has been weaker than the Brent. Brent has retained an uptrend and has been trading sideways. Sideways is okay, it’s also a trend by allowing something to take a rest to consolidate gains before advancing again.

Both Brent and WTI are really in a sideways move above their support levels. Eventually, Brent needs to push through the $126 level and WTI needs to get through the recent high, which is just above the $110 area. If Brent clears $126, the old high is $146. WTI clearing $111 would set that market up for a test of the old high, over time, near the $150 area.”

When asked about silver, Yamada replied, “You’ve got to watch support at $30. Silver tried to break out and failed, which isn’t great. So, silver needs more work (consolidation). It needs to get through the $35 to $36 area. That will open up a move to $40.”

When asked about gold specifically, Yamada responded, “Gold has to get through $1,800. $1,600 has to hold in the short-term. $1,550 to $1,600 is okay, but I wouldn’t like to see a move to the lower end of that range because your uptrend and support are coming in right now around $1,600.

Gold has a horizontal consolidation in place. I was disappointed gold couldn’t break $1,800 previously, but again, sideways is okay. This sideways action is healthy, this consolidation, but gold now has to prove itself.”


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