In Transition...to the Upside
While most major markets and commodities are still showing strength, or a least tenacity, the underlying technicals look encouraging, observe Mary Anne and Pamela Aden of The Aden Forecast.
Several markets continue to bounce up. Palladium is at an 11-week high, while copper, the base metals, the commodity currencies, the stock markets-especially the strong ones like Mexico-and the euro are all still bouncing up.
Gold and silver fell last week, but gold shares fell the most. Gold, however, bounced back above the $1,700 level, which is a good sign. Plus it rose along with the US dollar, and it's been holding above its major uptrends, which means this weakness is temporary. Once gold closes back above its 15-week moving average at $1,730, it will be back on track in good strength.
Silver is holding up better than gold. It's above its 15-week moving average at $33 today, and it'll look good by staying above it. Continue to use weakness to buy new positions.
Gold shares fell the most. The recent 3-month-plus low on the XAU index looks bad when compared to other markets, but gold shares are oversold. They're cheap, and their indicator fell to the major low area, as it continues to bottom in an oversold area. This means the downside is limited, and in a worst case, gold shares have support at the 2012 low area. Buy on weakness.
Copper is looking good, and it's now in a firm and solid rise by staying above $3.60. Crude is stabilizing above its $85 support.
The stock market looks good. The Dow Industrials closed at a four-week high last Thursday. Note that the S&P 500 is near its 15-week moving average, which also happens to be at the same level as its April high. A close above this MA at 1,420 would be a strong sign.
Bonds are firm as long as the 30-year yield stays below 2.85%. The ten-year yield would be weak at a four-month low if it closes and stays below 1.56%.
The US dollar bounced up after being under pressure for three weeks now. The dollar index is still vulnerable below 81, just like the euro will remain firm above 1.2850. The currencies are firm above 1.04 for the Australian dollar and 1.005 for the Canadian dollar. The New Zealand dollar and the Singapore dollar are strong. We're keeping our eyes on these currencies. Buy and keep the others.