GOING FOR THE GOLD -- BULLION BREAKS OUT -- BARRICK AND NEWMONT EXCEED 200-DAY AVERAGES -- TIPS GAIN GROUND ON TREASURY BONDS -- MCCELLAN OSCILLATOR TURNS NEGATIVE

GOLD HITS THREE MONTH HIGH ... The gold market is starting to attract a lot of attention and money. Chart 1 shows the streetTracks Gold Trust ETF (GLD) jumping $36 dollars today. In so doing, it has decisively cleared the falling resistance drawn over the July/October highs. And it did so on rising volume. Gold shares jumped 8% as well and are one of the market's strongest groups. Chart 2 shows the Market Vectors Gold Miners ETF (GDX) moving closer to a challenge of its 200-day average just above 35. Its relative strength ratio (below Chart 2) shows that gold stocks have been outperforming the S&P 500 since late October by a wide margin. There may be several reasons why money is flowing into gold. Gold is often viewed as a safe haven in times of financial turmoil. Another reason given by some analysts is that gold is rallying in anticipation of increased inflation resulting from the massive government bailout plan. I've pointed out that gold also does well in a deflationary environment which may be the biggest immediate threat. Whatever the reason, investors are going for the gold in the absence of other compelling alternatives.

Chart 1

Chart 2

BARRICK AND NEWMONT EXCEED 200-DAY LINES... Two of the biggest gold stocks have already exceeded their 200-day averages. Chart 3 shows Barrick Gold touching 40 for the first time in six months. Its relative strength ratio has hit a new 52-week high. Chart 4 shows Newmont Mining reaching a four-month high on rising relative strength. That's positive chart action.

Chart 3

Chart 4

TIP ETF ALSO GAINS GROUND... I've recently been listing fixed income categories that have been playing catch-up to an overbought Treasury bond market. Today, I'm adding Treasury Inflation Protected Securities (TIPS) to the list. Chart 5 shows the iShares Lehman TIPS bond Fund triangulating just below its 200-day moving average. Its relative strength line has been rising versus the long bond since late December. Although it main seem counter-intuitive that an inflation protected instrument would attract attention in a deflationary climate, it's possible that TIPS are starting to bounce for the same reason gold is. A huge amount of Treasury bonds coming on the market in the months ahead from government spending is starting to worry bond bulls and caused profit-taking in Treasury bonds this past week.

Chart 5

MCCLELLAN OSCILLATOR TURNS NEGATIVE ... On January 6, I wrote an explanation of the McClellan Oscillator and its longer-range version which is the Summation Index. The Oscillator measures short to intermediate momentum in NYSE market breadth. It's the difference between the 19- and 39-day EMAs of NYSE net advances. Readings over 100 market are overbought while a drop to -100 is oversold. Chart 6 shows the NYMO rallying from oversold readings during November and pulling back from an overbought reading a couple of weeks ago. The last red arrow shows the NYMO falling back below its zero line for the first time since late November. That's a negative sign for the market. The first two arrows show that downside crossings of the zero line in early September and early November accompanied market selloffs.

Chart 6