Market Wrap

Week Ending 5/28/10

The following excerpt is from the latest market wrap report, available on the Honest Money Gold & Silver Report website. All major markets are covered: stocks, bonds, currencies, and commodities, with the emphasis on the precious metals.

Bonds

With stocks holding support this week, bonds gave back some of their recent gains. The 10 Year Treasury note ($UST) gave back -1.00 point (-0.82%) to close at 120.31. The recent downturn in stocks and commodities resulted in part from the Greek debt crisis and its repercussions for the euro and the EU in general.

This resulted in a flight to safety. Money flowed into T-bonds, the dollar, the yen, and gold. This was a repeat of the late 2008 financial crisis, albeit on a smaller scale, as the chart below shows.

Notice at the bottom of the chart, how gold's rise has been constant and steady the entire time.

Gold

Although the flight to safety abated somewhat during the week, as evidenced by T-bonds correcting, the dollar advanced 1.58%, while gold rallied over 3%.

As shown in the bond section of the report, gold has been by far the strongest of any of the flight to safety asset plays.

Gold's daily chart shows a positive divergence in RSI, but MACD remains in a negative crossover. Notice the histograms are receding back towards zero, however.

Resistance is directly above as indicated by the horizontal dotted line, which coincides with the 50% retracement of the recent decline.

On the weekly chart, RSI and MACD are showing negative divergences, although MACD remains in a positive crossover. Support is marked by the blue horizontal line around 1160-1170.

Although gold gained for the week, there is reason to be cautious. Last week gold formed a bearish engulfing candlestick: the candle totally engulfed the prior week's candle, while closing to the downside.

This week's candle was positive, however, it was within the confines of last week's bearish engulfing candle. It's possible that a short term reversal could be forming. A lot will depend on whether the mini-crisis continues or if the safe haven play subsides.

Silver

Silver had a good week, gaining over 4%; however, this is less than half of last week's 9% loss. Price is fast approaching overhead resistance near 18.80.

MACD is still under a negative crossover, although the histograms are receding back towards zero. RSI is showing a positive divergence: it equaled its prior low, while price made a higher low.

Silver's weekly chart is similar to gold's in that it is showing negative divergence, while the daily charts have positive divergences. Price is bumping up into overhead resistance. STO has broken below the 80 overbought level. The blue dotted vertical lines show similar set-ups that have led to corrections in the past.

Gold Stocks

The gold miners (GDX) had a strong week, gaining 5.61% to close at 49.86; however, keep in mind that this is after last week's 11% loss, so the GDX recouped about 50% of the previous decline, as indicated by the Fib levels marked on the chart below.

STO & CCI have moved up nicely, but MACD remains under a negative crossover and has to turn positive for a sustainable rally to occur.

The weekly chart is mixed, as the GDX is in a rising price channel, and well above its lower trend line, yet it has plenty of room above before encountering its upper trend line.

As with physical gold, the last two week's candlesticks may be hinting at a short term reversal: last week's candle was a bearish engulfing; and this week's candle is nestled within last week's.

The close correlation with the stock market is evident, although this week the gold stocks far outperformed the overall market. Overhead resistance is close above, as marked by the blue horizontal line.

The above excerpt was taken in part from this week's latest market wrap report, available on the Honest Money Gold & Silver Report website. All major markets are covered: stocks, bonds, currencies, and commodities, with the emphasis on the precious metals.

Our stock watch list provides numerous investment ideas each week and the model portfolio offers a game plan to implement them. A FREE one-month trial subscription is available. Stop by and check it out.

Good Luck. Good Trading. Good Health. And that's a Wrap.

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