Issue #93
Dear Member,
Here is this week’s big picture update.
GOLD
Fundamentals:
A slew of weaker-than-expected economic data last Thursday sparked a safe haven bid for gold that took the precious metal up into resistance in the $1,260 – $1,270 zone.
With emerging markets including their currencies under pressure of late, gold is finding some buyers, including from capital fleeing equities and Treasuries.
However, gold has failed to move above important resistance levels. This week we need to watch the Fed meeting. I expect some wild volatility as the market waits to see if further tapering is announced.
Technicals:
Prices are having a tough time pushing through solid resistance stretching from the $1,260 to $1,280 area.
Strong support can be found back down at the $1,230 – $1,235 level.
SILVER
Fundamentals:
Silver lagged gold for the week, perhaps being caught between the market’s concern for the global economy and a potentially more severe slowdown in China.
Technicals:
The silver chart is reflecting the lag in price action compared to gold, as silver has failed to even close above the $20 level on a weekly basis.
It has been trading in a sideways-to-down manner following the 50-day moving average line, failing to bounce off it or break decidedly below it resting now on the center Bollinger Line (daily).
The upper Bollinger Line (daily) now rests at the $20.50 level and this is offering up a stiff area of resistance. Support comes in at the $19.40 level. But if we see a rally next week, this level should hold if tested.
Indicators are confirming the poor price action in silver with the Relative Strength Index (RSI) (daily) heading down now below the 50 level and the Moving Average Convergence-Divergence (MACD) (daily) potentially forming a bearish crossover with the histogram heading into negative readings.
THE U.S. DOLLAR
Fundamentals:
As emerging market concerns gathers steam, not to mention a China slowdown, coupled with Fed tapering that will continue into 2014 likely meaning higher yields in Treasuries, I expect capital to continue to head back into the U.S. and the dollar to resume its strength against all currencies including the euro, pound, yen and others.
Technicals:
The technical picture for the dollar deteriorated during the week on the back of the rout seen on Thursday as the U.S. Dollar Index pushed up into the 200-day moving average and upper Bollinger Line resistance around the 81.50 level.
I mentioned previously that this area would be difficult to breach and this proved to be the case.
Friday saw the dollar bounce off support at the lower Bollinger Line just above the 80 level, settling for the week just below the 50-day moving average at 80.70.
Overall, however, I expect further upside for the dollar.
THE U.S. 30 YEAR BOND
Fundamentals:
Safe haven plays were the name of the game for the week and bonds were in favor spurred on by emerging market concerns and reports from China showing a sharper contraction in manufacturing. Bonds have now gained for four consecutive weeks, the longest winning streak since April, pushing yields down to levels last seen at the end of October.
Yields may move a bit lower given the stock market’s rout last week, but I reaffirm my work that yields have bottomed on a long-term basis and are headed much higher in the months and years ahead.
Technicals:
I do see resistance starting at the 132 level all the way up to 135. However, as noted above, bonds are in a bear market unless we see a weekly close at least above the 135 level.
On the downside, any reversals in trend should find support initially at the 131 level and then the round number at 130. If we get a weekly close back below 129 then the bear market will then resume in bonds, with a vengeance.
Stay tuned to your inbox.
Best wishes,
Larry
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