Larry Baer's Technicals: Gold Rush Back On With QE3, Dollar Trending Lower & Treasury Yields Surging

September 17, 2012


On the weekly chart, the trend has just changed to the downside and the dollar has closed below its 50-period SMA, a bearish indicator. We still have some time before we are able to confirm whether the U.S. dollar may be in a longer-term downtrend on the weekly chart.

Although the trend is up, in the last two months the dollar closed below its 100-period, 50-period and nine-period SMAs on the monthly chart. Closing below these support areas illustrates the dollar’s current weakness. The dollar also indicated a king’s cross countertrend sell signal last month (August) on the monthly chart.

U.S. Dollar Index Monthly Chart

Sector Performance: June 2012
For a larger view, please click on the image above.


30-Year Treasury Bonds

The 30-year Treasury bonds issued a king’s cross countertrend sell signal on the daily chart on Sept. 5, which is still holding strong, and now the trend has changed to the downside. However, this puts us in the possibility of having a king's cross buy signal as well. For at least the next week, if we close above the previous day's high, we will have king's cross buy signal.

For another round of commodity price inflation, and specifically a major rally for gold, it’s my opinion that the yields on the bonds and notes need to increase. An increase in bond yields, which means a plunge in bond prices, may indicate a potential big move for gold. The 30-year T-bonds’ king’s cross sell signal came after a major retracement, and since it was issued, the bonds have dropped and closed below major support levels, including its nine-period, 20-period, 50-period and 100-period SMAs.

On the weekly chart, the T-bonds have been looking top-heavy for some time, and it appears as if the trend will now change to the downside. Now that they have taken out their August lows, the bonds and notes may continue to follow through lower, and gold prices may see significantly higher prices.

30-year Treasury Bonds Daily Chart

Sector Performance: June 2012

For a larger view, please click on the image above.




Contact Larry Baer at [email protected] or (312) 277-0112.

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Futures, options and forex trading is speculative in nature and involves substantial risk of loss. All known news and events have already been factored into the price of the underlying commodities discussed.

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