(The Weekly Digest reproduces the morning capsules made available every morning before the market open in the Real Time Feeds to the paying subscribers.)
GOLD CROWD FLOATS FRENCH DOWNGRADE RUMOR
March 20, 2012
Yesterday Spanish bond auction went well. Gold traders caught on the long side tried in vain to disparage the success of the auction with arguments that the success was artificial. They speculated that most of the bonds were bought by ECB and Spanish banks.
The market did not buy the argument and gold plunged to the major support at $1637 to $1641. As gold accelerated its plunge to $1632, the rumor that France had been downgraded was floated.
The timing of the rumor was impeccable. The plunge was arrested.
Traders who follow traditional technical analysis had been waiting for a while for break of the major support at $1637 to $1641 to take short positions. Yesterday morning such traders got heavily short. As the rumor of French downgrade caught steam, the newly minted shorts in gold panicked and covered. The result was a rapid rise to $1654.
The rumor mongers sold into the strength driving the price down again to the support level of about $1641.
Rumor mongers won. Traders who follow traditional technical analysis lost.
Let us see how the battle between gold bulls and bears takes shape today. We will maintain our short position in gold.
U.K. retail sales were better than expected.
Spanish bond yields have moved up, 10 year is again approaching 6% which is a danger zone.
Germany’s IFO business confidence index rose unexpectedly; analysts were expecting it to drop.
In the U.S. there are no material economic numbers today, but the market is buoyed by good earnings from MSFT, HON, GE, and MCD among others.
Gold futures are at $1644, silver futures are at $31.80, and oil futures are $103.35.
S&P 500 resistance levels are 1380, 1400, and 1410; support levels are 1368, 1358, and 1352.
DJIA futures are up 75 points.
GOLD BUGS SCOFF AT WELL RECEIVED SPANISH AUCTION
March 19, 2012
Spanish auction was well received. The target of 2.5 billion euros in 10 and two year bonds was slightly exceeded. Yields on 10 year bonds were 5.74%, up from 5.40% in the previous auction but less than the 6.0% danger mark that many had feared.
Gold bugs appear to be scoffing at the solid outcome. They speculate that most of the bonds were bought by ECB and Spanish banks.
In all likelihood there is some truth to the speculation advanced by gold bugs, but the point is the crisis has been averted for the time being.
Spain needs to be cautiously watched because the volume of long dated bonds in this auction was not high. Future auctions in Spain may cause jitters again.
Gold futures are at $1632, silver futures are at $31.39, and oil futures are $102.79.
S&P 500 resistance levels are 1400, 1410, and 1424; support levels are 1368, 1358, and 1352.
DJIA futures are up 35 points.
GOOD LOOKING TECHNOLOGY EARNINGS WEAK UNDER THE SURFACE
March 18, 2012
Yesterday after the market close, two technology giants INTC and IBM reported earnings. On the surface earnings looked real good. However digging beneath the surface shows material weakness in the results of both companies.
In this bullish market environment, market seems to ignore the negative aspects of earnings.
A reminder that tomorrow is the critical Spanish bond auction.
Yesterday gold and silver attempted to stage a rally but have retreated this morning. Of note is a strong rally attempt by gold and silver mining stocks yesterday. These stocks are oversold and offer a better value than the metals themselves.
Gold futures are at $1639, silver futures are at $31.53, and oil futures are $103.90.
S&P 500 resistance levels are 1400, 1410, and 1424; support levels are 1368, 1358, and 1352.
DJIA futures are down 36 points.
THE U.S. HOUSING STARTS FALTER
March 17, 2012
March housing starts came at 654k vs. 700k consensus. The bad news was offset by building permits in March at 747k vs. 710 consensus.
The Reserve Bank of India cuts its key lending rate by 50 basis points. This is the first cut in three years. This development shows that our call on India in ZYX Emerging Markets ETF Alert has been spot on.
The fear level about upcoming Spanish bond auctions is lessening as the offering of Spanish T-Bills meets with heavy demand.
Gold futures are at $1649, silver futures are at $31.59, and oil futures are $104.08.
S&P 500 resistance levels are 1380, 1400, and 1410; support levels are 1368, 1358, and 1352.
DJIA futures are up 71 points.
MARKETS GRIPPED BY FEAR OVER UPCOMING SPANISH BOND AUCTION
March 16, 2012
Markets all over the world are gripped by fear over upcoming Spanish bond auction. Spain is Europe’s fourth largest economy. 10 year sovereign Spanish debt yield rose to 6.14%. 6% is widely considered a danger mark.
Sentiment is strongly negative for Portuguese and Italian bonds.
Spain will auction short-term notes tomorrow, and two-year as well as 10 year bonds on Thursday.
If the 10 year auction goes well and markets are in a slump going into the auction, expect markets to explode up on Thursday.
In the U.S., stock futures have moved up strongly sidestepping concerns about Spain on strong earnings from Citi (C ), and strong retail sales data.
It will be interesting if the market reassess its optimism over strong retail sales data as the trading progresses.
On the surface it appears to us that retail sales were strong because of early onset of warm weather. It appears that most analysts did not take into account the warm weather in their estimates.
Interestingly, gold and silver were down on the prospect of a melt down in Spain, but have now moved up on strong retail sales. Gold and silver continue to react contrary to their traditional roles.
Gold futures are at $1652, silver futures are at $31.56, and oil futures are $103.
S&P 500 resistance levels are 1380, 1400, and 1420; support levels are 1368, 1358, and 1352.
DJIA futures are up 89 points.
