Archive for August, 2011

Has Gold Hit An Intermediate-Term Top?

Posted in GOLD (GLD) on August 29th, 2011 by admin – Be the first to comment

By Jim Donnelly, Olson Global Markets

On weekly bar charts, GLD (the largest gold ETF) hit an all-time high of 184.82 on Monday August 22nd. When it did, it hit key trend line resistance seen on a semi-log scale drawn off the highs of May 12, 2006 and of March 17, 2008. It also hit another resistance trend line drawn off the lows of May and June 2008 as well as the highs of September 29, 2008, February 20, 2009 and December 3, 2009. What does all this mean? It means that the 184.82 level on GLD is important over the intermediate-term. Overbought stochastic and RSI readings on weekly charts add to the importance of this level.

With a “gap” at 163.87 on GLD left “open” on August 5, 2011 (which is roughly equal to $1,650 for nearby gold futures), many technicians expect a pullback to that level to occur sometime soon. Worries that Federal Reserve Chairman Ben Bernanke could have introduced another round of quantitative easing at hisJackson Holemissive did not materialize. And although the absence of such stimulus should have calmed the gold markets down, it did not. Worries over Greek sovereign debt began to fester once again, along with the uncertainty of how the European Central Bank and its President Jean-Claude Trichet might handle that deteriorating situation. As a result, a partial recovery in gold prices was triggered by week’s end.

From this vantage point however, a “retest” of the 184.82 area on GLD should offer an opportunity to “lighten up” on GLD or gold for the intermediate-term. A solid surge above it, however, would suggest that a new and steeper trajectory for gold prices, and the fear that it represents, could emerge instead.

10-Year U.S. Treasury Yields Test Key Level

Posted in 10-Year Treasury Note (TNX) on August 22nd, 2011 by admin – Be the first to comment

By Jim Donnelly, Olson Global Markets

In the aftermath of the debt ceiling battle, and then the Fed’s decision to keep short-term interest rates near 0% through mid-2013, renewed worries over the financial condition of European banks sent the yield on 10-year Treasury Notes sharply lower. This occurred, of course, despite the historic downgrade of U.S. Debt by Standard and Poor’s just two weeks ago.  Heightened concerns over the possibility that the U.S. economy could be headed for a new recession also fostered the stampede into 10-year treasuries.

From a technical point-of-view, the yield on U.S. Treasury 10-year notes (TXN) tested an important support level (in terms of yield; resistance in terms of price) at 1.978% last week amid deeply oversold conditions on yields (very overbought conditions in terms of price) on weekly charts. That level sits upon key “cross” trend line support (in terms of yield; resistance in terms on price), which also acted as support in 2005, in early 2008 and in 2010. It was only in December of 2008 that 10-year yields broke decisively through this trend line boundary as worries over systemic “risk” were raging in the months following the collapse of Lehman Brothers.

Although overstretched technical conditions are present at his point in time too, sustained concerns over the global banking system (with the epicenter being in Europe this time around) could force 10-years yields below the 1.978% area. If it does, the next “leg” lower in yield (higher in price) would point to a possible test of the 1.50% level, where long-term “channel bottom” support (in terms of yield; resistance in terms of price) now sits.