Bill Baruch, president and founder of Blue Line Futures, previews E-mini S&P, Gold, Crude market...
Finding a Bottom: Metals, Bonds, Stocks
06/13/2012 10:30 am EST
All the markets we follow have been floundering in recent weeks, but there's no sign that the lows, while tested, will break down, observe Pam and Mary Anne Aden of The Aden Forecast.
The markets were starved for good news, and Bernanke provided some security last Thursday.
Most of the markets, already anticipating some sort of action, reversed direction last week. And when Bernanke said the Fed is ready to act, it was a welcome relief following so much uncertainty out of Europe and the US. This is creating volatility. In most cases, however, the markets have fallen far and fast and they re poised for a further rebound.
The metals markets have been on a rollercoaster ride lately. After surging, gold dropped, resisting at its 65-week moving average. It is essentially still stabilizing within a bottom area as long as it stays above $1,540. Silver is similar, and it'll stay firm above $27. These numbers are very important support levels and we're watching them closely.
Gold shares appear to be bottoming, and the XAU index will continue to be stable above 150. On the upside, gold, silver, and XAU would now show improvement by rising and staying above $1,600, $29, and 166, respectively.
The stock market fell further this past week, but it is now rebounding. Most of the stock indices dropped below their 65-week moving averages only to bounce back above them.
The leading indicators, however, are turning bearish. Currently, the technicals are marginal, and while stocks could rebound further in the short-term, the bear market is taking over internationally and it's now starting to affect US stocks too.
We continue to feel it's best to avoid stocks for the time being. That'll especially be true if the Dow Industrials and S&P 500 again decline and stay below 12,250 and 1,290, respectively. For now, the Dow Transportations is technically bearish below 5,050.
The crisis in the Eurozone hasn t gone away. It has simply calmed down for the moment. That s why the euro and the other currencies are also bouncing up. But the major trends remain down. The US dollar index will remain extremely strong by staying above 81.50. Keep your cash in US dollars.
US bonds have risen so fast, they re overextended. That means bond prices could decline further in the short-term, but the major trend is clearly up. In other words, interest rates could rise further in the near-term but the 30-year yield will remain very weak even if it rises to the 3.1% level.
Keep your government bonds. But if you have any long-term Treasury funds or ETFs, you may want to sell them for the time being. While good for the long haul, they re poised to fall further in the weeks ahead.
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