Front Running QE3

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Spanish Bond Yields Rising

Markets sold off on Friday due to the stronger dollar and Spanish bond yields moving to the highest levels during the current debt crisis.  Below is a chart of Spanish 10 year bond yields, which is trading above the psychologically important 7% level.  Click to enlarge.

Bottom Line:  With Spanish yields moving higher, the whole union could be on the verge of unraveling soon.  As Spanish bond yields rise, investors are demanding more interest for the risk of buying those bonds.  The US markets have been range bound and holding up well under slowing growth and average earnings reports.  Thank you for reading.

 

Still Range Bound

Even with Fridays move higher, we are still in the same range that I reported about last week.  Volume has also been below average.  So I would rate this market range bound until we get a full look at earnings.  Below is a chart of the S&P fund (SPY) with fibonacci retracement levels. Please click to enlarge.

Bottom Line:  We increased exposure in portfolios during the middle of the week.  I think the market still has some upward momentum to take it to (per chart above) the 138.00 area.  Thank you for reading.

Range Bound Markets

Now that earnings season is upon us, let's look at a chart of the S&P 500 (SPY) to gain some perspective on where we may be heading.  Below is a daily chart showing the recent bounce high at 137.80 and the low on June 4th at 127.14.  

So from the above chart we have a trading range of 8.38%, ( 127.14 low to 137.80 high ).  Volume has been lackluster lately probably from a holiday induced week.  Gold has not performed well during the month of June. We will be looking to buy gold on any dip down to prior support.  We believe that the Fed may act and give more Quantitative Easing (QE) stimulus when they meet in September, and gold should perfrom well if that is the case.  Below is a chart of Gold (GLD) and the zone we may be interested in buying.  

I would view a good risk / reward entry of GLD at the highlighted green area shown on the chart above.  I believe we may get there within the next 1-2 weeks.  

Bottom Line:  The S&P 500 looks to be range bound for now, but may gain better direction once earnings season is upon us.  Gold is heading down to it's support area again.  I expect that area to hold as support, making buying GLD a lower risk entry point.