S&P SPDR Metals and Mining ETF (XME)

Deal or No Deal? Key an Eye on the S&P Metals & Mining ETF (XME)

Posted in S&P SPDR Metals and Mining ETF (XME) on November 13th, 2011 by admin – Be the first to comment

By Jim Donnelly, Olson Global Markets

Just over a week ago, the financial markets thought that a “deal” was struck between Euro zone leaders and bondholders of Greek debt urging them to accept a voluntary 50 percent loss on the principal value of those holdings. The aim of the rescue plan was to reduce the “risk” of an imminent European financial debacle in return for another round of belt-tightening and austerity measures in Greece. The problem was that various Greek factions were not exactly “on board” with the “deal”, resulting in a call for a referendum last week by Greek Prime Minister George Papandreou. After surviving a “vote of confidence” late Friday night, the previously announce referendum was cancelled with a change in government now widely anticipated.

As last week’s episode in Greece played out, worries over financial “contagion” spreading to Italy resulted in a steady rise to the 6.40% level in 10-year Italian sovereign bonds, as well as a similar rise in precious metals prices.

One way to view the current unease in the financial markets is to take a look at the S&P SPDR Metals and Mining ETF (symbol: XME) which is currently approaching a test of key “cross” trend line resistance at 59.50. A set of bullishly positioned technical oscillators favor a “break” above the 59.50 level, putting it potentially on course for a return to its yearly high of 77.44 scored on March 6th. A break above that level, if it is challenged, would likely be viewed as a reflection of a much broader concern over European sovereign debt issues in general.