Wednesday, November 10, 2010

Silver Pounded, Stocks Holding Support

Although yesterday was pretty brutal for commodities, the uptrend for the stock indexes remains intact. It does so until these support levels are broken. Here are the obvious support levels for the Russell 2000 (TF Z0-240min) and the Dow (YM Z0-240min). If support holds, the party continues, if support is broken, then we may be in for a more meaningful correction.

Here is the hourly chart for the NASDAQ 100 (NQ Z0-60min). If resistance can be cleared, then look for the rally to continue. If 2164 is taken out, then look for more pain.

On the daily chart, the 30-year US Treasury (ZB Z0-D) has hit the support level I have been looking for. There is the potential for a pretty meaningful reversal from right about here. It needs to trigger. If support here fails, then this correction in bonds could get real ugly, real fast.

The yield has already rallied from 3.5% to 4.3% since September 1st (the day QE2 was announced). A move to $120 would put yields in the 4.7% range. Remember what I have been writing, that under QE1, there was a spike higher in yields, followed by a narrow trading range. The trading range on the 30-year Treasury was about 12% last year, so if you bought them wrong, you have some serious pain. If you bought them right, you had a nice year.

Today’s auction of the 30-year and the POMO purchase schedule announcement will probably have a big impact on bonds today.

Commodities had a very rough day yesterday, with several gold/silver stocks reversing 10% intraday. It was a news-driven event, as the futures exchange decided to raise the margin requirement for trading Silver. By definition, this sucks liquidity out of the system and lowers demand. The volume on the Silver ETF was about 25 times average! After a parabolic move, that is normally not a good sign. Commodities will have to be watched very closely here.

REITs also had a very ugly day yesterday and will need to be watched closely.

Tuesday, November 9, 2010

Updated Charts

Here are support and resistance levels for Apple (AAPL) –

Here are support and resistance levels for Baidu (BIDU) –

With Financials breaking out, here are resistance levels for Bank of America (BAC). BAC has crashed and is now bouncing. Resistance has held the entire way down. A breakout would be bullish for one of the biggest laggards in Financials.

Here is the S&P 500 (ES Z0-D). You can see that it is a few percent above support, but as long as that support holds, the uptrend remains.

The Euro (6E Z0-D) is pulling back and testing support. The chart of the US Dollar looks like the chart of BAC. When the Euro finally corrects, I am assuming that that will adversely impact commodities and stocks, so I am watching the Euro closely.

US Treasuries (ZB Z0-D) have been in a multi-week trading range. The price of the 30-year has been hit pretty hard, when you consider that it is a bond and is normally owned by conservative investors looking for income and safety. Nothing seems to be safe anymore. Everything is volatile…

Support is very close to the current price. Let me just note that I am watching US Treasuries very closely.