(The Weekly Digest reproduces the morning capsules made available every morning before the market open in the Real Time Feeds to the paying subscribers.)
GDP NUMBER MAKES IT DIFFICULT FOR THE FED TO ACT
July 27, 2012
Q2 advance GDP came at 1.5% vs 1.2% consensus. Q1 GDP was revised up to 2.0% from 1.9%. These numbers show that American economy is stronger than generally believed.
Market has been running up on anticipation of the Fed easing and stimulus from the ECB. The strong GDP number makes it difficult for the Fed to ease at this point. Astute investors should be extremely cautious as the strength can easily reverse.
Gold futures are at $1622, silver futures are at $27.76, and oil futures are $89.46.
S&P 500 resistance levels are 1368, 1380, and 1400; support levels are 1358, 1352, and 1348.
DJIA futures are up 44 points.
DRAGHI RUNS THE MARKET 136 DJIA POINTS
July 26, 2012
This morning DJIA futures were down 20 points. Then came a statement from Mario Draghi, ECB chief that ECB will do what ever is needed to protect euro. Futures immediately shot up by 116 DJIA points.
Spanish and Italian bond yields have dramatically fallen.
Market participants in their enthusiasm missed two important points. First, Draghi was very clear in including the words “within its mandate”. Would you expect ECB chief to say anything different than he plans to protect Europe? Second, this was not an official policy statement from ECB, Draghi was speaking at an investment conference.
The point is that caution is warranted.
Gold futures are at $1613, silver futures are at $27.54, and oil futures are $90.15.
S&P 500 resistance levels are 1352, 1358, and 1368; support levels are 1348, 1339, and 1330.
DJIA futures are up 139 points.
GOLD AND SILVER SPIKE ON THE FED LEAK
July 25, 2012
Yesterday at about 3:45 pm EDT, WSJ published a leak from the Federal Reserve. Such leaks are usually deliberate on the part of the Federal Reserve. Here is an excerpt from WSJ of the leak:
Federal Reserve officials, impatient with the economy’s sluggish growth and high unemployment, are moving closer to taking new steps to spur activity and hiring.
Since their June policy meeting, officials have made clear—in interviews, speeches and testimony to Congress—that they find the current state of the economy unacceptable. Many officials appear increasingly inclined to move unless they see evidence soon that activity is picking up on its own.
Amid the recent wave of disappointing economic news, conversation inside the Fed has turned more intensely toward the questions of how and when to move
Gold and silver immediately started moving up after the leak and have spiked further this morning.
If it was not for our significant experience with the leaks from the Fed over the years, we would have been inclined to upgrade gold and silver to buy.
Over years we have learned that lots of times the Fed is simply jaw boning the markets with talk and never follows through. For this reason our upgrade on gold and silver is only to neutral with a positive bias. Our method takes into account both risk and reward. We give trading signals only when risk reward ratio is favorable. Here there is significant potential reward but the risk is very high.
Resistance level is $1607 to $1611 and then $1628 to $1635.
The first support is $1593 to $1600 and after that $1566 to $1572.
As always we will keep a close watch on gold and silver. If there is a favorable risk reward trading signal, we will provide specific details on the Real Time Feed.
Gold futures are at $1599, silver futures are at $27.21, and oil futures are $88.97.
S&P 500 resistance levels are 1339, 1348, and 1352; support levels are 1330, 1324, and 1312.
DJIA futures are up 125 points.
FINALLY A FEW POSITIVES
July 24, 2012
Moody’s downgrades outlook for Germany, Luxembourg, and the Netherlands to negative. These are core European Union countries with AAA ratings.
It seems counter intuitive, but this is a positive development. The threat of a downgrade may force Germany’s hand to be more flexible.
Overall earnings are coming out better than expectations.
In China HSBC Purchasing Manager’s Index came at 49.5 compared to 48.2 last month. This indicates that the pace of contraction in manufacturing in China is slowing.
Gold futures are at $1575, silver futures are at $26.78, and oil futures are $87.56.
S&P 500 resistance levels are 1348, 1352, and 1358; support levels are 1339, 1330, and 1324.
DJIA futures are down 21 points.
POST EXPIRATION SWOON, CHINA WORRIES AND SPANISH BONDS
July 23, 2012
As we have been writing, a big part of the market move last week was related to option expiration. As expected, we are seeing a reversal of part of that move.
More market participants are coming to grips with slowing growth in China.
Spanish bond yields reached euro era high of 7.52%. Previous peak of 10 year debt was 7.285%.
Expect market to be very volatile.
Gold futures are at $1568, silver futures are at $26.79, and oil futures are $88.29.
S&P 500 resistance levels are 1348, 1352, and 1358; support levels are 1330, 1324, and 1312.
DJIA futures are down 210 points.
