By Jim Donnelly, Olson Global Markets

The enormous need for the U.S. Treasury to raise cash now may be coming home to roost. An almost endless supply of U.S. Treasury bills, notes and bonds that have to be auctioned off on a regular basis is now battling corporate debt issuers for investors. This is underscored by the fact that a number of short-term corporate fixed income yields are now trading below those of U.S. treasuries. Further out the yield curve, the spread between AAA corporate bonds and U.S. treasuries has narrowed dramatically over the past 24 months from almost 120 basis points to just 30.

Technically, the yield on U.S. Treasury 10-year notes (TNX) is now approaching key resistance with its price approaching key support (since there is an inverse relationship between the two). A break above the 3.95% level on U.S. Treasury 10-year notes would clearly be reason for concern since the next key resistance area (in terms of yield) sits near the 4.70% area.

Such a move up in yields would not only cost U.S. taxpayers more in interest expense, but it would also likely dampen both housing sales and starts with mortgage rates rising in concert.

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By Jim Donnelly, Olson Global Markets

Although a continuation of the rally in the U.S. dollar index (DXY) over the past few months had been expected to keep a lid on precious metal prices, the Philadelphia Gold/Silver Sector Index (XAU) has defied that theory. Clearly, there is an inverse relationship between precious metals and paper currencies of all types. However, after staging a solid correction from the December 2009 peak, the bid for gold and silver has remained relatively firm as both the Euro and British pound have sunk. By contrast, the DXY has gained strength versus each of those currencies during this period.

Still, global buyers as well as speculators taking a longer-term view of the prospect of mounting sovereign debt obligations have not apparently lost their appetite for gold and/or silver. Neither have saver nations like China and India.

Evidence of this situation can be seen by looking at a chart of the XAU on the weekly time frame. With weekly stochastic studies now rising bullish, the XAU appears poised to break, possibly, above key “mid-channel” resistance at 173.50. If it does, such a “break” would have very bullish implications for precious metals in general, and gold and silver in particular. A failure to do so, on the other hand, would be reason to reevaluate.

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By Jim Donnelly, Olson Global Markets

With equity prices pressing higher, it appears that the Dow Jones Industrial Average (DJIA) is quickly approaching a test of the “backside” of former trend line support (now resistance) at the 10,770 level. In the absence of an overbought condition on weekly charts, there appears to be a reasonable chance that a “break” above resistance will occur.

If it does, the next focus of attention would be for an extension up to, possibly, key “cross” trend line resistance now located near 12,200 (but rises over time). This, of course, would compliment the S&P 500 Index, which is also edging toward key “channel top” resistance on its weekly chart.

Still, key trend line resistance on the Dow Jones Industrial Average is closer, relatively, than “channel top” resistance is to the S&P 500 Index. As a result, if the DJIA does break higher, it would then become the leader in the overall advance higher. If it does not, it would also become a telling “non-event” to equity bulls. The current technical set-up, however, does favor a “break” to the upside.

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By Jim Donnelly, Olson Global Markets

Despite overbought conditions that were clearly in place a week ago, the S&P 500 Index (SPX) broke solidly above two (2) forms of trend line resistance at the 1,113 level. This caught many investors and observers (like us) offside, particularly heading into the release of last Friday’s monthly employment data. As a result, the S&P 500 Index now appears to be headed for a test of key “channel top” resistance currently located in the area of 1,185 (and rises over time).

February’s better-than-expected employment report, last week’s announcement of fewer initial jobless claims, a 4.1% jump in same store sales at the chain-store level, a 5.9% rise in GDP, a preliminary estimate of a rise in the Reuters/University of Michigan preliminary index of consumer sentiment for March to 73.8 from 73.6 a month earlier, and a modest 0.2% increase in inventories teamed up to frame a set of economic improvements that were clearly stock-market friendly.

Further, expectations for a series of solid job gains over the next few months are likely to add some froth to the current enthusiasm for equities. The strength and extent of the current bullish momentum, however, will likely be measured as the S&P 500 Index (SPX) approaches key “channel top” resistance in future sessions.

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