We’ll let the media sort this one out

Former House Speaker Newt Gingrich,
R-Ga., tells Tim Russert of NBC’s “Meet the Press” that the current Mideast
crisis equals the beginning of World War III.
— Gold drops $20 and
the US dollar rallies. Go figure. We’ll let the media figure this one out.


Meanwhile, our portfolio is has soared nearly 5% on an unleveraged basis this
month with MEX and AUD even holding strong today while USDCHF soared from our
recommended buy level in the 1.22/1.20 area.


We maintain a bullish view on the peso and Aussie while the crack below 1.26 in
EURUSD opens up the strong potential for a swarm of dollar short covering this
week considering that hedge funds are holding a near record net long position in
EURUSD. Look for prices to break the 1.25 area this week to open up further
selling potential.

Note that the dollar index has broken above the key 0.86 level
and we need to see a move above stiff resistance at 86.00/50 to see sustained

Gold:  Gold rallied off of our support zone at $540/$580 and
following a five wave rally has now reversed today despite mounting tensions in
the middle east. This may be the start of wave C down which we expect to end the
larger “wave II” pullback followed by a soaring “wave III” rally.


As we have said for months now, “In the broader picture, this long awaited
correction is underway and recall that a top here at $720 will mark the end of
“wave 1 of V” meaning a pullback to $580/540 would be “wave 2 of V” followed by
an explosive rally in “wave 3 of V” to new all time highs.”

Stocks:  No change: Stocks slipped below key support at 1245
last week and a sustained move below woluld be quite bearish and would likely
coincide with a strong rally in bonds (decline in rates).


Recall that last week we said, “Key resistance is at 1290 and we would look to
go short at this resistance with risk limited to above 1330 or more cautiously
on a sustained move below 1,250.” Traders that followed that move should look to
tighten up stops to cost and add to this position upon a possible slide below
1,250 and then 1,220.

Bonds:  No change: We are bouncing off of trendline support at
104 and only a move through channel resistance crossing at 105 would suggest
that a larger rebound is underway. We see a rally to 107/109 followed by a
renewed decline.

Crude Oil:  No change: The five wave rally is near an end. But
with tensions in the Mid-east our target of $78/$82 may not mark the top. The
reason we say this is that Crude on a weekly chart looks like it may go “postal”
or “parabolic” to be more exact. Its hard to say, but spec positioning allows
for hedge funds and hedgers alike to buy buy buy.


As we have said for months, :While not expected, an “extended fifth” wave would
mean that this is just the first leg up within a larger move. That seems
unlikely, but the implications are that either we could top out at $78 or
possibly at $82. A prudent move would be to take some profits there and wait for
a pullback to add back to longs in the hopes of higher highs in the $82-$92
range.” If we did get a spike, a move to $90/$100 would be a wonderful area to
go short.

Recommended long at $55 last November. Still looking for a
move to $80-$100 over the coming months.

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Jes Black is the fund manager at Black Flag Capital
Partners and Chairman of the firm’s Investment Committee, which oversees
research, investment and trading strategies. You can find out more about Jes at
BlackFlagForex.com. Prior to organizing the hedge fund he was hired by MG
Financial Group to help run their flagship news and analysis department,
Forexnews.com. After four years as a senior currency strategist he went on to
found FxMoneyTrends.com – a research firm catering to professional traders.