Gold and silver pause after rallying on QE3 and now must hold their gains.
December gold appeared to take a breather from its rally this week, but it did manage to signal a somewhat weak buy signal Friday (9/21) on the daily chart. As long as gold closes above $1763, the market will continue to super-trend.
Silver will continue to super-trend as long as it closes above $34.35. I define a super-trend as a market that is trending above its nine-period simple moving average. Gold and silver also both registered new recent highs. For gold, there is short-term resistance at the $1810 level and silver has some resistance around $36.10.
Gold Chart
30-Year Treasury Bonds
The Fed’s QE3 seems to have put a short-term bottom on bond prices and the bonds issued a king’s cross countertrend buy signal on Tuesday (9/18). The king’s cross is my attempt to account for why, shortly after a change in trend, a market often puts in its extreme. What I discovered is that the trend had not actually changed; rather, it was just an event—a news event, short or long covering, etc.—that caused a correction. After this “event,” the market would often turn around and resume its previous trend.
The bonds have already hit their king’s cross minimum objective; however, until we get a traditional trending sell signal, I’ll still hold onto some of my positions. The 3-year bond may rise as high as 1.52 percent.
As I’ve stated before, for another round of commodity price inflation, and specifically a major rally for gold and silver, yields on the bonds and notes need to increase. An increase in bond yields means a plunge in bond prices; therefore, this is an important market to watch.
Bond Chart
U.S. Dollar Index
The U.S. Dollar Index put the brakes on its downward plunge this week. This is the first week the dollar has closed higher than it opened in a month, so it seems that a retracement was inevitable.
It was also an inside week on the weekly chart for the U.S. dollar, which is when the week's highs and lows close inside the trading range of the previous week. This may be indicating the short-term rally may not be over.
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