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The BP crisis in the Gulf of Mexico has rightfully been analysed (mostly) from the ecological perspective. People's lives and livelihoods are in grave danger. But that focus has equally masked something very serious from a financial perspective, in my opinion, that could lead to an acceleration of the crisis brought about by the Lehman implosion.

People are seriously underestimating how much liquidity in the global financial world is dependent on a solvent BP. BP extends credit - through trading and finance. They extend the amounts, quality and duration of credit a bank could only dream of. The Gold community should think about the financial muscle behind a company with 100+ years of proven oil and gas reserves. Think about that in comparison with what a bank, with few tangible assets, (truly, not allegedly) possesses (no wonder they all started trading for a living!). Then think about what happens if BP goes under. This is no bank. With proven reserves and wells in the ground, equity in fields all over the planet, in terms of credit quality and credit provision - nothing can match an oil major. God only knows how many assets around the planet are dependent on credit and finance extended from BP. It is likely to dwarf any banking entity in multiples.

And at the heart of it all are those dreadful OTC derivatives again! Banks try and lean on major oil companies because they have exactly the kind of credit-worthiness that they themselves lack. In fact, major oil companies, conversely, spend large amounts of time both denying Banks credit and trying to get Bank risk off of their books in their trading operations. Oil companies have always mistrusted bank creditworthiness and have largely considered the banking industry a bad financial joke. Banks plead with oil companies to let them trade beyond one year in duration. Banks even used to do losing trades with oil companies simply to get them on their trading register... a foot in the door so that they could subsequently beg for an extension in credit size and duration.

For the banks, all trading was based on what the early derivatives giant, Bankers Trust, named their trading system: RAROC - or, Risk Adjusted Return on Credit. Trading is a function of credit bequeathed, mixed with the risk of the (trading) position. As trading and credit are intertwined, we might do well to remember what might happen to global liquidity and markets if BP suffers what many believe to be its deserved fate of bankruptcy. The Intercontinental Exchange (ICE) has already been and will be further undermined by BP's distress. They are one of the only "hard asset" entities backing up this so-called exchange.

If BP does go bust (regardless of whether it is deserved), and even if it is just badly wounded and the US entity is allowed to fail, the long-term OTC derivatives in the oil, refined products and natural gas markets that get nullified could be catastrophic. These will kick-back into the banking system. BP is the primary player on the long-end of the energy curve. How exposed are Goldman sub J. Aron, Morgan Stanley and JPM? Probably hugely. Now credit has been cut to BP. Counter-parties will not accept their name beyond one year in duration. This is unheard of. A giant is on the ropes. If he falls, the very earth may shake as he hits the ground.

As we are beginning to see, the Western pension structure, financial trading and global credit are all inter-twined. BP is central to this, as a massive supplier of what many believe(d) to be AAA credit. So while we see banks roll over and die, and sovereign entities begin to falter... we now have a major oil company on the verge of going under. Another leg of the global economic "chair" is being viciously kicked out from under us. Ecological damage is not just an eco-event on its isolated own. It has been added to the list of man-made disasters jeopardizing the world economy. The price tag and resultant knock-on effects of a BP failure could easily be equal to that of a Lehman, if not more. It is surely, at the very least, Enron x10.

All the counter-party risk associated with the current BP situation means the term curve of the global oil trade has likely shut down. Here we have yet another credit-based event causing a lock-up in markets that will now impede trade and commerce. It looks like an exact replication of the 2008 credit market seizure could ensue all over again - and it could probably be a lot worse. The world is in a far more delicate state now.

Although never really discussed, the world is highly reliant on BPs provision of long-term credit to many core industries. Who makes good on all the outstanding paper that so many smaller oil, gas and electricity companies, airlines, shipping companies, local bus, railway and transportation networks that rely on BPs creditworthiness and performance for? It doesn't take a genius to figure out how this could all unwind. If BP has to be bailed-out, like a bank, the system will have to print even more unimaginable amounts of money.

The market, intellectually lazy and slow to realization, as it often is, probably has not woken up to it yet - but the BP crisis could unleash damage similar to the banking crisis. A BP failure through bankruptcy could make Lehman look small in comparison, and shake the financial house of cards we live in even more severely. If the implicit danger of the possibilities imbedded in such an event doesn't make an individual now turn towards gold at full speed, it is likely that nothing will.

Source: http://oilprice.com/Energy/Energy-General/A-Bankrupt-BP-Worse-For-The-Financial-World-Than-Lehman-Brothers.html

By Jim Sinclair at JSMineset via Oilprice.com who offer detailed analysis on Oil, alternative Energy, Commodities, Finance and Geopolitics. They also provide free Geopolitical intelligence to help investors gain a greater understanding of world events and the impact they have on certain regions and sectors. Visit: http://www.oilprice.com

Here is a question for you to ponder, if the banks are public enemy number 1, why is it that we the people have been funding their fun? Are we the people making money on the spread or a piece of the spread on lending that the banks are making and if not, why not? Remember, we the people helped them out of their financial crisis so; we the people should enjoy some of the prosperity that these banks are enjoying. Here is a quote from THINK GREECE, IT'S FRIDAY by Michael Santoli, Barron's Magazine May 17, 2010. "Goldman Sachs (GS), JP MORGAN Chase (JPM) and Bank of America (BAC) - disclosed in filings that their trading operations were profitable each and every day in the first quarter." After all, how many of us could say that we made money every day on our investments? Where is our dividend or piece of the American pie?

Here is a fact that every investor must understand. Your computer is slower than the big computers you are trading against. You cannot be faster at scalping than they are so, you answer must be to develop a trading plan and a strategy. We are not saying buy and hold, but rather know where you want to buy and where to take profits or where to sell and where to cover. Would you walk across the street without looking to see if traffic is approaching so why buy without understanding or, at the very least looking at the chart to make sure you are pricing your long or short appropriately.

Which markets have too much agreement to one side of the trade? There are several that jump out of the pages when you look; one is the US Dollar index. There are simply too many US Dollar bulls in the market. Can this continue? Well of course it can and likely will, but there will come a time when, the US Dollar will have enough of a drop to scare the weak handed bulls out of the trade. The same trade goes for gold, which is acting more like a currency and fear trade than an inflation hedge. Crude oil and the Euro have too many bears and will have the opposite problem. No, we are not telling you to buy crude oil and Euros but we are telling you that these trades are lopsided and will likely reverse.

Tuesday: April housing starts are released at 8:30 and April PPI is released a t8:30.
Wednesday: April CPI is released at 8:30 and the minutes of the FOMC two day meeting are released at 2:00.
Thursday: April leading indicator index is released at 10:00 and the May Philly Survey is released at 10:00.

The US Dollar index has been on an upside tear in recent days. We have a 9-count on the chart and signs of exhaustion. The problem with this is that the market can and likely will continue on its upside blow off for a while longer. Seriously, with the euro under fire, the Greek debt crisis not yet resolved and the other problems waiting in the wings, there seems to be good reason to either buy gold or the US Dollar. That said, we noticed that the boat is getting lopsided and there are far too many euro bears crowding the side of the boat. When too many agree, it may be time not to agree. That doesn't mean jumping on the opposite side but rather removing your short position on the euro. The 5-day moving average is at 85.097. The top of the Bollinger band is at 86.324 and the lower edge is seen at 79.927. Although we are overbought as measured by all the indicators that we follow herein, all indicators remain on a buy. Naturally, we are above the Ichimoku Clouds for the daily, weekly and monthly time-frames. We are overbought on the weekly time-frame and heading there on the monthly time-frame. The next targets are 87.22, 87.84, 89.47 and 89.71.

The S&P 500 futures contract retreated in the Friday session broadcasting the markets fear of something bad happening over the weekend when a trade could not be made. Naturally, we should see a relief in the Monday session. The downtrend line is at 1178.48 and we must close above that level to resume the bullish view of this market. Not one of the indicators that we follow herein is issuing a buy-signal. The stochastic indicator, the RSI and our own indicator are all issuing a sell-signal. The Thomas DeMark Expert indicator is going flat at overbought levels. We closed inside the Ichimoku Cloud on the daily time-frame; we are above the clouds for the weekly time-frame and are below the clouds for the monthly time-frame. We are entering an options expiration week, which could bring with it increased volatility. It will be important for the S&P 500 to remain above 1125 or risk a return trip to the 1100 area.

The NASDAQ 100 retreated in the Friday session but fell more than the S&P 500 did. The NASDAQ 100 must stay above 1887.40. We closed inside the Ichimoku Clouds for the daily time-frame. We are above the clouds for the weekly time-frame and just at the lip of the clouds for the monthly time-frame. The 5-day moving average is at 1940.90. The top of the Bollinger band is at 2093.97 and the lower edge is seen at 1870.84. The stochastic indicator, the RSI and our own indicator are all issuing a sell-signal. The Thomas DeMark Expert indicator is going flat at over bought levels. It really looks as though this index has some work to do rebuilding confidence. The downtrend line is at 1991.27. The weekly chart does not look as awful as the daily chart does. We closed up on the week but we have signs of exhaustion. The indicators are curling to the upside and will likely issue a buy-signal by the end of the week.

The Russell 2000 declined in the Friday session. The 5-day moving average is at 699.90. The top of the Bollinger band is at 755.32 and the lower edge is seen at 666.24. The stochastic indicator, the RSI and our own indicator all are issuing a sell-signal on the daily chart. The Thomas DeMark Expert indicator continues to issue a buy-signal at overbought levels. We are above the Ichimoku Clouds for the daily and the weekly time-frames. The market must stay above 685 or risk a return to 678, 670 and 667. If we don't remove 703 in short order, we could be setting ourselves up for another spill. Time will tell on this one.

Crude oil has been declining with the continued fear of an economic slowdown re-emerging as caused by the austerity programs needed to resolve some of the euro-worries. This is further amplified by the worries that the Asian communities are trying to slow down their growth to a manageable number. All of this is weighing on the crude oil market. Actually, until or unless we break much below 69 +/- there should be no worries about crude oil. We are just in a pronounced trading range. Of course should be break below 69, we will move out of that trading range and could be in a wilder ride. The daily chart is below the Ichimoku clouds. We are above the clouds on the weekly time-frame but in the clouds for the monthly time frame. We are oversold on the daily and weekly time-frames. We do not see even a bend in the indicators that would lead us to believe that we are at a bottom. We are grossly oversold. The 5-day moving average is at 74.96. The top of the Bollinger band is at 89.41 and the lower edge is seen at 72.03. We closed below the lower band and likely will not be able to stay there for very long. This should be an interesting week for crude oil.

It would appear that everybody loves gold. When this occurs, we get somewhat uncomfortable about our long gold stance. This could be a good time to remove some of the profitable positions in gold. The 5-day moving average is at 1224.24. The top of the Bollinger band is at 1180.49 and the lower edge is seen at 1116.88. All the indicators that we follow herein are issuing a sell-signal. We certainly would not go short this market but would consider removing some profits. We are above the Ichimoku Clouds on the all time-frames. If we trade above 1250, this market will have no resistance overhead and will likely cause the shorts to cover and the market to whoosh to the upside. After the initial piling into the trade, the market will likely return to the breakout level allowing the more conservative investor a chance to enter this market.

The US stock market is resilient and seems to want to rally. The only thing that will prevent this market from returning to the April highs will be an event that will cause fear to return to this euphoric market. We have seen European downgrades and an attack on Goldman Sachs, neither of which was bad enough to send some fear into this market. We need to see an event like a failed Treasury Auction. That is not going to happen anytime soon because money is flowing back into our currency and our markets. The yield starved investor is taking more risk daily just to get some returns on their portfolios. At the current money market rate, you are losing money and not keeping up with costs.

Although the VIX rallied from a low of 17.47 to a high of 22.39 this past week, we believe that we could see the VIX at 29 or 30 in the near term. Investors and traders alike would love to see some volatility return to this market. Volatility helps the options sellers get the returns they need. Meanwhile the US 10 year treasuries are comfortably below 4% and will not compete with returns achievable in the market. It is thought that once the treasuries yields above 5% or 5.25% that they will compete for dollars earmarked for the US equities markets. For right now, we seem to be miles away from that competition.

Another factor that needs to be considered is; should the dividend preference treatment be removed, money will again flow into the debt market. At the moment that tax benefit has encouraged investors to buy high yielding securities rather than debt instruments whose income is ordinary income and taxed as such. Should the Congress neither pass nor not renew that preference item it would help make the case for investors to invest in bonds rather than stocks.

Monday: March personal income/consumption is released at 8:30, March construction spending is released at 10:00, and April ISM is released at 10:00.
Tuesday: March factory orders are released at 10:00.
Wednesday: Challenger Gray & Christmas April job cut announcements, and ISM nonmanufacturing index for April is released at 10:00.
Thursday: 1st quarter productivity and Federal Reserve Chairman Bernanke speaks.
Friday: April nonfarm payrolls and unemployment rate are released at 8:30 and March consumer credit is released at 3:00.

The US Dollar index retreated in the Friday session with some of the money flowing to the Euro. The uptrend line for the Monday session is at 81.77, we remain above the uptrend line. The 9-day moving average is 81.799, which is very close to the uptrend line for the Monday session. The top of the Bollinger band is at 82.553 and the lower edge is seen at 80.224. We are above the Ichimuko Clouds for the daily time-frame but are in the clouds for both the weekly and the monthly time-frames. All the indicators that we follow are issuing a sell-signal on the daily chart of the US Dollar index. For the weekly and monthly charts, the indicators continue to issue a buy-signal.

The S&P 500 futures contract lost 1.8% of its value in the Friday session. The 5-day moving average is at 1193.60. The top of the Bollinger band is at 1215.32 and the lower edge is seen at 1174.50. There is a resistance line at 1208.15 which should serve to stop most rally attempts. There should be some support at 1176.25. Further support will be seen at 1151.67 and at 1146+/-. At the moment, the chart pattern looks like a head and shoulders top. We need to see 1176.75 removed to confirm that pattern. The stochastic indicator, RSI and our own indicator are all issuing a continued sell-signal with plenty of room to the downside. The Thomas DeMark Expert indicator is issuing a buy-signal. The long-term uptrend line is at 1054. Look at the point and figure chart. You can see the head and shoulders formation. There is a downtrend line at 1204.44 and an uptrend line at 1184.36. Remember Bob Farrell's Market Rules; "Markets tend to return to the mean over time. Excesses in one direction will lead to an opposite excess in the other direction. The public buys the most at the top and the least at the bottom." These are just three of the ten "rules of the road." We are above the Ichimuko Clouds for both the daily and the weekly time-frame but are below the clouds for the monthly time frame. Both the weekly and the monthly oscillators are overbought and curling over to the downside. Once the weekend is over, expect to see some of the buyers return to the market as the weekend fear is removed.

The NASDAQ 100 has a bearish engulfing candle on the chart. The 5-day moving average is at 2020.45. The top of the Bollinger band is at 2058.85 and the lower edge is seen at 1962.97. The stochastic indicator, the RSI and our own indicator all continue to issue a sell-signal. The weekly and monthly indicators, except for the flat DeMark, are issuing a sell-signal. The Thomas DeMark Expert indicator is going sideways a little below neutral for all time-frames. We are above the Ichimuko Clouds on all time-frames. We have signs of exhaustion on all time-frames. We will have some concern if the market trades below 1991.50 because we will be in the Market Profile single print area.

The Russell 2000 has a bearish engulfing candle on the chart as a result of the Friday trading session. All the indicators that we follow herein are issuing a continued sell-signal on the daily and the weekly charts. Only the stochastic indicator is issuing a sell-signal on the monthly chart, the other indicators continue to point higher at overbought levels. We have signs of exhaustion on the chart for both the weekly and the monthly time-frames. The chart indicates to us that we need to see a defense of the 708 level. The 5-day moving average is at 726.76. The top of the Bollinger band is at 743.10 and the lower edge is seen at 687.77. We closed the Friday session at the 20 day moving average.

Crude oil rallied in the Friday session. The downtrend line for the Monday session is at 86.65. We have an important high just overhead, that high is at 87.59. Should the market remove that level we will likely see a run to 90 and then to 93. We are above the Ichimuko Clouds on all time-frames. All the indicators that we follow herein are uniformly issuing a continued buy-signal. We will likely see some resistance at the 50% retracement level (from the high of 147.27 and the low of 32.48) of 89.96. The 5-day moving average is at 84.23. The top of the Bollinger band is at 87.34 and the lower edge is seen at 81.78. We have a long-term target of 105 for crude oil.

Gold rallied in the Friday session removing the previous month's high of 1169.00. All the indicators followed herein are issuing a continued buy-signal albeit at overbought levels. The 5-day moving average is at 1167.20. The top of the Bollinger band is at 1178.56 and the lower edge is seen at 1127.00. With all the global chaos, the PIIGS, Goldman Sachs and the oil spill in the Gulf, what would you expect? Naturally gold went on a trip to the upside of the chart. Naturally, we are above the Ichimuko Clouds.

As is often the case, it appears as though traders spent the day squaring positions ahead of the FOMC meeting. The Fed will meet tomorrow but we won't hear the results of the interest rate decision until Wednesday afternoon.

Most analysts aren't expecting the Fed to take any action to change monetary policy but there is some speculation of rate hikes later in the year, so traders will pay close attention to the commentary.

This week's auctions began today with a 5-year TIPS offering, but the real news will come in the next few sessions with the issuance of $44 billion in 2-year notes, $42 billion in 5-year notes and $32 billion in 7-years. The TIPS went off with ok demand from domestic investors but low demand from overseas investors; this put the market back on the defensive. The Treasury complex noticeably weakened following the auction.

We continue to see support in the 30-year bond near 116 but the 10-year note reached our downside target in overnight trade (within a few ticks anyway). This leaves our charts, and our opinion, a bit mixed. We are taking a relatively neutral stance in the near-term as direction will be highly dependent on the FOMC, stocks and auctions...and this could be a difficult week to predict price.

Don't forget to register for our upcoming webinar with SFO Magazine!! See our website (below) for details.

* Due to time constraints and our fiduciary duty to put clients first, the charts provided in this newsletter may not reflect the current session data. However, market analysis and commentary does. Charts provided by Track 'n Trade, Gecko software.

**Seasonality is already be factored into current prices, any references to such does not indicate future market action.

Treasury Bond and Note Option Trading Recommendations

**There is unlimited risk in naked option selling.

April 22 - Our clients were advised to sell the July bond 121 calls for 22 or better, and were filled this morning on the rally.

Treasury Bond and Note Futures Trading Recommendations

**There is unlimited risk in trading futures.

Flat

Carley Garner
Senior Analyst / Commodity Broker
DeCarley Trading
cgarner@DeCarleyTrading.com
1-866-790-TRADE
Local : 702-947-0701

http://www.DeCarleyTrading.com
http://www.ATradersFirstBookonCommodities.com

*Due to the volatile nature of the futures markets some information and charts in this report may not be timely.

There is substantial risk of loss in trading futures and options.

Past performance is not indicative of future results. The information and data in this report were obtained from sources considered reliable. Their accuracy or completeness is not guaranteed and the giving of the same is not to be deemed as an offer or solicitation on our part with respect to the sale or purchase of any securities or commodities. Any decision to purchase or sell as a result of the opinions expressed in this report will be the full responsibility of the person authorizing such transaction.

OilPrice.com Oil Market Summary for 04/19/2010 to 04/23/2010

After languishing most of the week, crude oil prices galloped to the finish line on Friday, tacking on 1.7% and recouping most of last week's losses as positive new-housing sale data spurred most markets forward.

The decision by the Greek government on Friday to activate a bailout plan from the European Union and the International Monetary Fund eased pressure on the euro, contributing to oil price gains as the dollar slipped against the joint European currency.

The benchmark West Texas Intermediate contract gained $1.42 Friday to end the week at $85.12 a barrel, compared with the benchmark's finish of $83.24 in the previous week.

An unexpectedly strong gain of 27% in U.S. new housing sales in March - the strongest monthly gain in nearly five years - galvanized a market looking for any sign of a pickup in U.S. demand for oil. Stock markets also advanced on the news, led by energy stocks.

The week started with oil prices taking a hit in the wake of Iceland's volcano grounding most northern European flights and then bounced back on Tuesday as authorities began to ease flight restrictions. Some analysts also cited lingering concern about U.S. fraud charges against Goldman Sachs for Monday's decline, after the announcement of the civil suit last Friday pushed most markets down.

The weekly U.S. inventory report on Wednesday was bearish for oil prices, showing high stockpiles of crude in the Midwest, where influx of new Canadian oil and a temporary slump in demand due to refinery maintenance led to a build-up in stocks.

For much of the week, the exchange rate between the euro and the dollar tended to drive oil prices amid mixed economic data. The euro trended lower through Thursday with the uncertainty about Greece maintaining pressure on it. The formal announcement on Friday that Greece would in fact seek the funds removed some of that uncertainty.

The IMF said in its World Economic Outlook that relatively strong economic growth would keep upward pressure on most commodities prices. However, the multilateral lending agency cautioned that in the case of oil, OPEC could increase its production if it wanted to keep oil prices in the $70 to $80 trading range.

Source: http://www.oilprice.com/article-us-housing-data-spurs-late-gains-in-oil-prices-after-mixed-week-304.html

By. Darrell Delamaide for Oilprice.com who focus on Geopolitical analysis, Energy markets, Crude oil, Alternative Energy and Finance. They also have a Free Investment intelligence newsletter that informs investors of the most breaking events taking place around the world. Visit www.oilprice.com

Currency, like all forms of abstract value, is based on trust. And trust itself is based - except among the most naïve - on experience, and the repetitive demonstration of fidelity, whether positive or negative. At present, the US dollar, which had experienced a gradual rise during the 20th Century to the position gained well into the Cold War of being the trading world's reserve currency. It had the mass, in terms of volumes of available currency; it had the backing of an indisputably wealthy national asset base to move away from the gold standard; it had stable governmental backing.

All of that is evaporating. Not, in absolute terms, as far as the mass of currency available, because that has dramatically expanded in recent years, and particularly during the past year of the Administration of Pres. Barack Obama. Not in the underlying asset valuation of the US economy, but it has begun to erode as the productive capability of the US to extract that value diminishes due to excess governmental interference and anti-business practices. It is far to say that other countries, from Nigeria to Russia, have vast untapped underlying asset value. That they did not create global reserve currencies from their naira and ruble was due to governance failures.

However, as we are witnessing, good governance as an essential component of currency value and the trust in that currency, can transform overnight, just as we witnessed the post-World War II collapse of sterling, and, now, the shakiness of trust in the US dollar (despite the reality that, at $14.2-trillion in value in 2008, is the world's largest). The age of the US dollar as the global reserve currency is not yet over, but it is threatened, and the trend toward a flight from the dollar (despite occasional returns to it) is evident. At present, however, the dollar is shored up because in many respects there is nothing of its stature ready to replace it. This leads to the essential question:

Are we entering a period in which we may have no global reserve currency?

The People's Republic of China (PRC) has been searching for safe-havens for its holdings of foreign earnings. The US dollar has slipped in its esteem, with some short-term benefits, perhaps for US exports, but with perilous long-term consequences. As a result, and whilst attempting to preserve the intrinsic value of its currency holdings, the PRC has been gradually scaling back its holdings in US currencies or US dollar-denominated instruments.

Where can the PRC go with its hoard? It looked at euro investments, at Canadian and Australian dollar holdings, and so on. The Australian and Canadian economic bases -- at just under a trillion US dollar GDP for Australia, and about $1.4-trillion GDP for Canada -- are insufficiently large to hold much in the way of PRC investments. Nonetheless, these economies have benefited from the PRC dilemma. The euro, however, is, like the US dollar, suffering from a loss of credibility, and unless some profound action is taken the euro may dramatically diminish in credibility, severely hampering the loose confederal structure of the European Union, preventing it from becoming the federal state of Europe to which some (mostly unelected) aspire.

We are, then, faced with a situation in which we may find a world without a standby currency, when, for a period after World War II, it had a couple: the US dollar and the pound sterling. It could have had more -- the German mark and the Japanese yen -- of the parent states of those currencies had been in a position to build a global base of trust. Now we are left in territory unfamiliar to all those now living, other than for the interregna of the World Wars.

What are some options?

India, with a GDP equivalent to only about one-trillion US dollars (and how long will we use the US dollar as a global measure?) is not in the running. The PRC in 2007 already had a GDP of $3.2-trillion, and had, by that time done to India what India itself did in competitive terms to Pakistan over the past decade or so. The Indo-Pak strategic competition ended in India's economic triumph. The Indo-PRC strategic competition may well have also already been decided by the PRC's true "great leap forward": the one it took when it embraced capitalism and not the one avowed by Chairman Mao Zedong.

So can the PRC move toward creating the renminbi (Ren Min Bi: People's Currency, of which the yuan is the principal measure, such as the yen or dollar) as a global reserve currency?

Not yet. The PRC is hampered by a lack of transparent economic (and political) governance and a lack of market-determined tradability for its currency. And this in turn means that it has not yet, and cannot yet, gain global trust in its currency. That does not mean that it is not a tradable currency; it is, but with reservations.

The PRC, at present, cannot afford to move toward total economic or political transparency. It is a structure, arguably a mix between a federal and confederal and excessively centrist systems, which is in flux, much of it the flux of growth. This is inherently unstable, and the PRC leadership wisely will not tamper with the formula merely for the sake of providing the US with the economic satisfaction of lowering the exchange rate for the yuan or providing the world with the satisfaction of a new reserve trading currency.

The international community may be able to muster some credibility to resume greater reliance on the International Monetary Fund's Special Drawing Rights (SDRs), created in 1969 to reflect "baskets of currencies", but this mechanism of the Bretton Woods accords (which relied on fixed exchange-rate thinking and which, in any event, collapsed in 1973) remains clumsy. Still, SDRs continue to exist and may be the standby for a period. Some private institutions are also issuing trading certificates, but these would also take a lot of growth in backing and credibility to have any merit. And that leaves the old standby, gold, as a major standard of measure, albeit a difficult one. Physical trade in gold is not practicable for modern transaction scales; paper based on gold is, as yet, lacking in trust and a credible set of issuing authorities.

What this all means, in sum, is the prospect that major trade will gradually become more bilateral in nature, based on very real mutual trust in each other's currencies or goods. This will be a significant limiting factor in trade, and will make bilateral balances of greater interest than in the past when trade balances of a bilateral nature "washed out" in the great mixing bowl of the global banking system.

This situation, too, will severely impact investment in research and development of a global nature. It will, without doubt, also lead us back into an era of greater nationalism and national competition.

Analysis By Gregory R. Copley for Oilprice.com who focus on Fossil Fuels, Alternative Energy, Metals, Oil Prices and Geopolitics. To find out more visit their website at: www.oilprice.com

This week we took note of something rather interesting; specifically there was a great deal of chatter going around regarding the current rally. As the mortal investor begs the question of divergences seen in the recent rally a veritable chorus of gurus and talking heads responds yes, this rally was good and that yes, a new bull market hath commeth; one we mortal investors must respect. While we will agree in so much that a one-day retreat will not be viewed as a returning bear market, it must be remembered this story is not dictated by the media gurus or seers but by the tape. We merely are observers of the markets, noting past behavior and patterns that we may observe. We do not tell the market where to go or how to go; basically we observe and report thus making observations of current behavior and similarities to past behaviors.

We noted in last week's letter that the market was primed for a retreat and further, while we knew that it was coming, we didn't know when it was coming. This past week our dear friend Hendrik pointed to the VIX chart highlighting a 13 count using the Demark indicator. Further observation of the VIX chart showed a very clear morning star formation. As you might imagine, this event made the hairs on our neck stand at attention and indicated that within a few days it was likely some event would take the market downward. The excuse was Goldman vs. the SEC, go figure.

Perhaps the only way to stop the sort of poor behavior demonstrated by Goldman et al, is to hold them accountable for their actions beyond a fine. Give them a black mark on their record, note for all to see that they are violating the streets code of ethics and make an example out of them. This sort of punishment is frequently seen for small broker/dealers, but the big guys slide by with a slap on the wrist and a few bucks to be paid out. They never learn because they are never hurt.

More importantly, what was done to punish the banks and mortgage companies who phantomized applications, messaged the figures and awarded mortgages based on fictitious valuations to people who couldn't afford them. What of the banks? Yes, Wall Street took full advantage of these loan obligations and packaged them into units to sell, but they weren't the loan originators just the resellers. Where were the regulators during this loan selling frenzy and, more importantly, where are they now? The banks had to be bailed out and in effect held harmless? Wall Street was bad but they only took the mortgages and repackaged them, they did not make the loans. Oh, by the way, we are back to 3% down and you too can be a proud home owner.

Today, the banks (which were brokerage houses just a couple of years ago and banks that were always banks) are enjoying almost zero percent interest rates when they borrow from the federal government. They then loan that money back to the government via Treasuries at a profit. Banks also lend money to the public via loans at a spread of about four/six points and they enjoy charging interest rates on credit cards from about 6% to 29% (and remember, all of this on money that they are borrowing at near 0% from the government). That is some punishment for having been a party to a near collapse of the financial markets. Can we get a piece of that action?

Monday: March leading indicators are released at 10:00 and Federal Reserve Board Governor Duke speaks. IBM, Citi and Lily just a few of the earnings to be released.
Tuesday: Earnings continue with Apple, J&J, Coke etc.
Thursday: March PPI is released at 8:30, March existing home sales are released at 10:00 and the earnings parade continues.
Friday: March durable goods are released at 8:30 and March new home sales are released at 10:00

The US Dollar index rallied in the Friday session moving above the 5-day moving average which is at 80.627. We remain below the downtrend line of 81.44. All the indicators that we follow herein are uniformly issuing a buy-signal. We gapped lower in the April 12, 2010 session and stepped into that gap on Friday closing that gap. The US Dollar remains below the downtrend line of 81.44 and must close above that line to turn this chart bullish. The top of the Bollinger band is 82.37 and the lower edge is seen as 80.213. We are above the Ichimoku clouds for the daily time-frame but are in the clouds for the weekly and the monthly time-frames. Both the weekly and the monthly charts look toppy. On the upside, there is almost no resistance above 82.17 and single prints on the Market Profile chart. This tells us that should we get to that level, we will likely melt up.

The S&P 500 futures contract remains above the uptrend line which is at 1182.51. The 5-day moving average is at 1198.15. The top of the Bollinger band is at 1207.42 and the lower edge is seen at 1151.37. The stochastic indicator finally broke below the support level of 68.05 and posted the lowest level seen since mid February. This indicator continues above the neutral level but is pointing lower. The RSI also broke to the lowest level seen since February when it closed the Friday session at 57.22, which is still above neutral but pointing lower. Our own indicator is issuing a sell-signal, but the Thomas DeMark Expert indicator is going sideways at overbought levels. We are above the Ichimoku clouds on the daily and the weekly time-frames but are below the clouds for the monthly time frame. We are overbought on both the weekly and the monthly time-frames. The point and figure chart tells us that so long as we stay above 1185, we should be fine.

The NASDAQ 100 looks to be in better shape than does the S&P 500. Why you ask, look no further than the stochastic indicator and the RSI. Neither the stochastic indicator nor the RSI broke below previous levels seen in this bull run that began in February. We noted last week that "the daily stochastic breaks below 57 and the RSI breaks below 65" would be needed to make us uncomfortable. Well, the daily stochastic indicator is pointing lower but closed the Friday session at 71.13 and the RSI closed the session at 65.73. We note that the RSI is getting very close to making a new low, one not seen since the beginning of the bull run, but it isn't there at this time. The 5-day moving average is at 2012.95. The top of the Bollinger band is at 2026.81 and the lower edge is seen at 1924.48. The uptrend line is at 1986.33. We are above the Ichimoku clouds for the daily, weekly and monthly time-frames.

The Russell 2000 looks the best of the financial indices. The 5-day moving average is at 712.72. The top of the Bollinger band is at 721.27 and the lower edge is seen at 664.87. We do have signs of exhaustion on the daily chart but we remain above the uptrend line at 709.42 and one at 707.85. We are above the Ichimoku clouds for all time-frames. The stochastic indicator, the RSI and our own indicator continue to issue a sell signal on both the daily and the weekly charts. The Thomas DeMark Expert indicator is going sideways at overbought levels. Our advice is to stay very nibble and defensive. This market and the NASDAQ 100 have out-performed the S&P 500. One reason for this underperformance to the downside is that there are no large financial companies in this small cap index or in the NASDAQ 100. This has helped keep both the NASDAQ 100 and the Russell 2000 from participating to the extent that the others did on the downside.

Crude oil closed below the uptrend line in the Friday session. The uptrend line is seen at 83.50. The 5-day moving average is at 84.59. The top of the Bollinger band is at 87.84 and the lower edge is seen at 79.23. All the indicators that we follow continue to issue a sell-signal and have room to the downside. We are above the Ichimoku clouds for the daily, weekly and monthly time-frames. The Market Profile chart shows lots of support as we retreat. On the upside, we will find ourselves in unstable areas above 87.09. Above that level, we will likely see a melt up. There should be good stability found in the 79.92 to 82.87 area.

Gold met with lots of selling in the Friday session leaving a very large bearish candle on the chart. The uptrend line has been broken. The 5-day moving average is at 1153.88. The top of the Bollinger band is at 1177.37 and the lower edge is seen at 1077.92. All the indicators that we follow herein are pointing lower with plenty of room to the downside. We are above the Ichimoku clouds for the daily, weekly and monthly time-frames. Unless and until we can close above 1164.80 we will probe the downside finding support all the way down to1086.40. The point and figure chart tells us that we need to close above 1137.80.

The S&P 500 futures contract plowed higher for the day and for another week. We have seen this index rally for the past three months. It is now approaching the 0.618% Fibonacci retracement number which is at about 1237.86. We observe on the daily action, a pattern of softness intraday with buying at the end of the day. There could be two possible reasons for this behavior; one is that institutions are making their decision late in the day and investing in the last hour of trading and the other, those who were short all day looking for a market correction, threw in the towel by the end of the day and covered their positions. We believe that it may be a combination of the two causing the end-of-day rallies. We certainly understand the reasoning for this. After all, how happy can you be earning 0.45% on your money and then enjoying the tax you have to pay on that interest your money earned? Basically, you are losing money, even if we were to factor in very tame inflation. (Many economists believe that we are in a disinflationary environment, we disagree and believe that we are in stagflation.) Yes, the market has been overbought for months, but this behavior can continue until it ends. Reasonable people understand that this will persist until it doesn't. Remember, actions once put in to motion tend to remain in that direction. To change direction we need to see exaggerated force in opposition to the current force and since the "buy the dips" crew is back in action that force is lacking. Think about bad habits like smoking; it is easier to keep smoking than to quit. Quitting takes a lot of effort and pain. Besides, bull markets are a lot more fun than are bear markets.

Earnings season begins on Monday with Alcoa's release after the close. Expectations are running to the high side and the market will meet those expectations. Think about the comparisons to last year and logic tells you that it won't take much to beat out last year's projected depression levels and that this year's "happy happy joy joy" projections will be positive. The question you need to ask is whether the forward looking projections will be correct. Are we moving into an expansion or something less positive? Unless people find employment and incomes improve, this recovery will be doomed. How healthy is the market really, are we fooling ourselves into buying the propaganda produced by our government? Will we actually be able to pay our debts without crushing our children's future? Is our currency behaving better because everybody's is a lot worse than ours is. These are just a few questions that will eventually need to be answered.

It seems that as winter gives way to spring and the blossoms appear our mood improves and we feel compelled to open our wallets and take a little risk. We have noticed investors, are taking more risk than usual. Money appears to be leaving the perceived safety of the money market funds, and is being invested in the equity market where, it has a greater chance of finding returns. That said, here is a little comment about the Bollinger bands. The S&P 500, the NASDAQ 100 and the Russell 2000 all close at or above the Bollinger bands on the charts. When reviewing past history of these indices, you will note, that the Bollinger bands will become wider as the market moves to extremes (either up or down). Rarely is this extreme seen for more than three or so days. If you are buying into the breakout, remember that we will retreat from the upper Bollinger band and likely return to near the 20 day moving average. We need to point out that in July of 2008, we rallied above the upper Bollinger band for many days and did not return to the 20 day moving average until December of 2008. This period could be similar, but only time will tell. This is just an observation not a fact written in stone.

Opening at the Broadhurst Theatre in New York City on April 27th, "Enron" the musical. How about as a follow-up Broadway show: "Obamacare the drama" or "Ruben and Greenspan the Follies." We love the fact that we can make fun of ourselves. It is healthy and harmless might even warn us not to do it again, something like Prohibition, the subject of many movie scripts.

Monday: Alcoa releases earnings after the close. Tuesday: March import prices are released at 8:30 and February international trade is released at 8:30. Wednesday: March CPI is released at 8:30, March retail sales are released at 8:30, February business inventories are released at 10:00, Chairman Bernanke testifies on "the Hill," and the Fed Beige book is released. Thursday: March industrial production and capacity utilization is released at 9:15, and the Philly Fed Survey is released at 10:00. Friday: March housing starts and April Michigan sentiment is released at 9:45 to 10:00.

The US Dollar Index retreated in the Friday session. Should the US Dollar Index close below 80.52, the door will be open to 79.65 and 78.77. The uptrend line for the Monday session is at 80.98 or so. The 5-day moving average is at 81.41. The top of the Bollinger band is at 82.56 and the lower edge is seen at 79.85. The stochastic indicator, the RSI and our own indicator all continue to issue a sell-signal with plenty of room to the downside. The Thomas DeMark Expert indicator continues to point higher at overbought levels. We are above the Ichimoku Clouds for the daily time-frame but in the clouds for both the weekly and the monthly time-frames. The uptrend line on the weekly chart is at 80.87. It looks as though the US Dollar Index could see further declines in the short term. To turn this chart positive you will need to see a close above 81.99.

The S&P 500 futures contract closed above the upper Bollinger band in the Friday session. This index has been grossly overbought for months and remains overbought as measured by the RSI and the stochastic indicator, both of which continue to point to higher levels. Our own indicator is not overbought but does continue to issue a buy-signal. The Thomas DeMark Expert indicator is issuing a sell-signal. The uptrend line is seen at 1174.89. The 5-day moving average is at 1178.47. The top of the Bollinger band is at 1190.44 and the lower edge is seen at 1150.72. The rally in the Friday session can only be seen as a substantial breakout to the upside. We do need to see some follow-through of this action with better volume. We are above the Ichimoku Clouds for both the daily and the weekly time-frames, but remain below the clouds for the monthly time-frame. We are overbought on all time-frames, daily, weekly and monthly. The next real area of resistance is at the 0.618 level of 1237.86. We do have signs of exhaustion on the weekly chart.

The NASDAQ 100 rallied 0.61% in the Friday session underperforming the S&P 500's rally of 0.75% and the Russell 2000 rally of 0.70%. The problem we see is that the NASDAQ and the Russell 2000 have led this rally and now seem to be falling behind the rally in the S&P 500. Still the NASDAQ 100 managed to close at the upper edge of the Bollinger band in the Friday session. The NASDAQ closed at the highs of the day. The 5-day moving average is at 1969.38. The top of the Bollinger band is at 1990.92 and the lower edge is seen at 1922.62. Naturally, we are above the Ichimoku Clouds for the daily, weekly and the monthly time-frames. We are overbought on all time-frames. All the indicators that we follow continue to point higher at overbought levels. Overbought is a relative term, in an bull market, overbought levels can be seen for extended periods of time so don't let the condition fool you into believing that there has to be a sell-off. We will remain at these levels until the daily stochastic breaks below 57 and the RSI breaks below 65. When looking at the point and figure chart, you will notice that the NASDAQ 100 broke out of a double top at 1987.50.

The Russell 2000 closed above the upper Bollinger band in the Friday session. All the indicators are overbought but only the RSI and stochastic are issuing a continued buy-signal. The Thomas DeMark Expert indicator is issuing a fresh sell-signal and our own indicator is flat-lining. The 5-day moving average is at 690.45. The upper edge of the Bollinger band is at 701.43 and the lower edge is seen at 667.15. Should the market retreat, good support will be seen at 648.90. We are above the Ichimoku Clouds for the daily and the weekly time-frames. We are overbought for all time-frames. There is little overhead supply to keep this market down. Don't fight the trend until it no longer is the trend. The uptrend line is at 693.10.

Crude oil has been in retreat since touching a high of 87.09 in the Tuesday session. There is a strong uptrend line at 82.03 if broken will open the door to 78.57 and 74.59. We are above the Ichimoku Clouds for the daily, weekly and monthly time-frames. The 5-day moving average is at 84.75. The top of the Bollinger band is at 87.16 and the lower edge is seen at 78.40. While we are in retreat, we see some support at 83.09. The market is demonstrating a disconnect with the US Dollar. Generally speaking, as the dollar retreats, crude oil (priced in US Dollars) rallies. Lately, we have not seen this connection. Crude oil also plays into the recovery/expansion chatter. Should the global economies expand, naturally there will be increased demand for crude oil and the price should increase. Many economists see disinflation in our future. We see stagflation in our future, increased prices with stagnate wage growth. Thus, we have less money to spend on ever higher bills.

Gold is headed higher as people become concerned, not about inflation but rather, about currency risk. Gold the ultimate currency has been inching higher as the PIIGS problems continue. The Euro has been battered and the US Dollar is plagued with debt. The market is concerned about the Pound Sterling and most other currencies ergo, gold becomes the vehicle of choice. You can trade gold in all currencies. Simply stated this has kept the demand for gold high. The 5-day moving average is at 1131.86. The top of the Bollinger band is at 1158.06 and the lower edge is seen at 1078.42. Gold is overbought and will issue a sell-signal in the Monday session. It likely will retreat to 1145.80 and then 1132.80, but will find a bid upon shallow retreats. We have supply up to the December 2009 highs. It does look as though, we are going to go through those highs in the not too distant future.