Archive for November, 2011

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.

Dow Jones Industrial Average Re-Aimed At Key Resistance Zone

Posted in Dow Jones Industrial Average (DJI) on November 1st, 2011 by admin – Be the first to comment

By Jim Donnelly, Olson Global Markets

With optimism that Euro zone leaders have come to terms with private banks and insurers last week for them to accept a voluntary 50 percent loss on Greek government bonds has apparently taken the “risk” of an imminent European financial debacle off the table for the time being. That, in turn, has ignited a shift by investors to employ funds back in the equity markets and away from fixed income assets.

Moreover, the move away from an underweighted equity position to a more balanced risk profile was bolstered recently by a better-than-expected set of economic data that included: a 2.5% rise in domestic Q3 GDP; an unexpectedly rise in October’s Consumer confidence index to 60.9 from 59.4 in September (Thomson Reuters/University of Michigan); a 2,000 person decline in Initial jobless claims this week to 402,000; and a scorecard of Q3 earnings that show 77% of the S&P 500 companies (of the 284 reporting thus far) have beaten street estimates.

While earnings guidance for Q4 2011 are far less upbeat with 52 companies issuing negative guidance versus 21 issuing positive guidance, last week’s spate of economic data reduced fears of a previously anticipated “double dip” recession for now as well.

From a technical point of view, the Dow Jones Industrial Average (DJI) now appears to be aimed once again for a test of a key resistance zone bounded by two trend line levels, the first at 13,650; and the second at 14,050. Bolstering this outlook is a set of positively positioned technical oscillators on the weekly time frame favor a move higher over the intermediate-term.

That being said, there remain a host of naysayers who point to a glum employment picture, a still depressed real estate market with issues yet to be resolved, and a more conservative credit atmosphere with regard to bank lending. Details and reactions to last week’s European financial plan will likely trigger more episodes that have yet to be played out.

Nevertheless, upside price activity on the Dow Jones Industrial Average looks like a reasonably good bet heading into Q4.