It seems that people start ignoring again the accumulated debt. This is what I was thinking about when I was telling you that the financial debacle is not here yet. The average investor is an irrational specimen. When everyone buys he jumps on board as well and when the sell off amplifies he sells all his portfolio holdings and starts complaining about the incurred losses. You probably know that you have to buy when most people hesitate or are scared and sell when everybody around you is excited about the ‘‘big potential profits’’. Easier said than done! As an economist I always watch the fundamentals of the markets to figure out the big picture. It helps me catch those long-term waves which are the most fruitful ones. But to make money in the short term there is nothing better than the technical analysis. Take as example the current situation! It is obvious that nobody can live on credit all the time. At one point the borrower will hit the wall and the creditors will not only refuse to lend but will put pressure on him to repay his debt. He will see himself obliged to work harder and cut his expenses for repaying the loans or to go bankruptcy. The last option is the worst case scenario as after a bankruptcy he will loose his assets in covering his liabilities and he should start from zero without been able to borrow. The United States are in such a position now. However, there are many short term factors which will postpone the end of the happy borrower. Here comes the technical analysis to help us figure out how long



yet we can enjoy the current bull. More on this in my next commentaries.

Going back to the stock markets, we can see a good improvement on the technical side. Almost all of them closed higher than their one year uptrend lines. We can declare the august storm officially over if they stay here without breaking decisively down. The next week should give us a good idea but as I have being mentioning previously, we should enjoy a very good ride over the next 12-15 months.

We have the same situation for the currencies. The US$ Index is back bellow 81 and after the brief correction the currencies are presently in a consolidation mood. The next wave up is coming but not immediately. We can see the move in a month or two but not right now.

The resource sector is doing well. Taking into account the upcoming strengthening of the broader market the resource shares should be among the winners in the next months.Gold closed at 673.20 which is a return to the upside move. However, this move should first be confirmed by a close beyond the 675 mark and especially the recent high of 685. Silver, on the other hand, still has to go and stay higher than 13.20 in order to break its present downtrend pattern. Crude Oil is in a recovering stage and as everything else it needs to show more strength. However it is still our best bet at this stage.

September is used to be a month for consolidation and this year action is tending to prove it once again.

Good investing and best regards,

Stefan Penkov

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