MARKET INDEXES STILL TESTING OCTOBER LOW -- SO ARE FOREIGN ETFS -- CHIP DOWNGRADE WEIGHS ON MARKET AND OFFSETS BNI BOUNCE -- GOLD HITS RECORD HIGH AS DOLLAR TESTS 50-DAY AVERAGE
GOLD HITS NEW RECORD HIGH... Gold prices have erupted to new record highs today. Chart 1 shows the streetTracks Gold ETF (GLD) breaking through its October highs today on rising volume. Chart 2 shows Silver iShares (SLV) bouncing off chart support at their late-September low and 50-day average. Precious metal shares are up 5% today. Chart 3 shows the Market Vectors Gold Miners ETF (GDX) bouncing sharply off support near 42. Most commodities are trading modestly higher today, but not nearly as much as gold. The dollar is modestly higher, so that's not the reason. Barrick Gold and Newmont Mining reported better than expected earnings yesterday which may be helping them today. It may simply be a flight into gold as a safe haven from a weakening stock market. For whatever the reason, gold is still one of the best places to be.
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CHIP DOWNGRADE WEIGHS ON MARKET... We've been pointing out the recent deterioration in chip stocks. It got even worse today following a brokerage downgrade. Chart 4 shows Semiconductor Holders (SMH) slipping to a four-month low. Chip stocks are weighing on the market and the Nasdaq in particular. Chart 5 shows Intel having broken chart support at its recent low. [The Dow Transports are jumping sharply today owing to Berkshire's announced intention to buy the remaining shares of Burlington Northern. The rail stock is up 28%]. Most stock groups, however, are still in the red as the major indexes test their October lows.
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OCTOBER LOWS BEING THREATENED... Major market indexes continue to test important chart support at their early October low. Chart 7 shows the Nasdaq Composite in most danger of breaking it. The biggest losers in the Nasdaq are chip stocks like Novellus, KLA Tencor, Applied Materials, and Intel. Foreign stocks are undergoing a similar test. Charts 8 and 9 show EAFE Index and Emerging Market iShares threatening their recent lows. A decisive close below those levels would turn the market's intermediate trend lower.
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DOLLAR TESTS 50-DAY LINE... Some of the stock selling is coming from a rebound in the dollar. Chart 10 shows the Power Shares Dollar ETF (UUP) hitting a new high for the month and testing its 50-day average. What the UUP does from here could help determine the direction of stocks. The fact that gold is rising in the face of a bouncing dollar is unusual, but may suggest that gold traders are more worried about falling stocks than a bouncing dollar.
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