APPLE AND GOOGLE LEAD QQQQ HIGHER -- GOLD AND BONDS HOLD SUPPORT AS S&P 500 BREAKS RESISTANCE -- BOND ETF CONSOLIDATES ABOVE RESISTANCE -- TREASURY YIELDS TRACK COMMODITY ETF -- GOLD AND SILVER ETFS CONSOLIDATE NEAR RESISTANCE
APPLE AND GOOGLE LEAD QQQQ HIGHER... Link for todays video. Trading was mixed much of Wednesday, but big techs and the Nasdaq 100 ETF (QQQQ) showed some leadership. Chart 1 shows QQQQ breaking above its early June high with a surge today. QQQQ is up four of the last five days and up over 7% in the last four days. John Murphy noted leadership from chips on Tuesday and chips continued as the Semiconductor Index ($SOX) extended its gains. We are also seeing upside leadership from two tech titans on Wednesday. Chart 2 shows Apple (AAPL) breaking above the triangle trendline with a surge above 265 today. The stock is up five days straight and nearing resistance in the 270 area. Low volume over the last four days is a concern as resistance nears. Chart 3 shows Google (GOOG) with a triangle as well. However, the position over the triangle is much different. Apple formed a triangle near its highs. Google formed a triangle near its lows. Google surged with good volume on Tuesday, but Wednesdays volume is lacking as resistance comes into play. Chart 4 shows Microsoft (MSFT) stalling just below its early June high. A small double bottom is taking shape and a break above this high would argue for further strength towards the 28.5-29 area. Apple makes up 18.84% of QQQQ, Microsoft is 4.60% and Google is 4.24%. Together, these three account for over 27% of QQQQ.
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Chart 1
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Chart 2
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Chart 3
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Chart 4
GOLD AND BONDS HOLD SUPPORT AS S&P 500 BREAKS RESISTANCE... Despite a big surge in the stock market over the last week and a half, gold and bonds held their ground and did not break key support levels. Gold and bonds benefitted from a flight to safety as money moved out of risky assets in May and early June. Given the recent relationship, one would have expected more weakness from gold and bonds over the last 7-8 days. After all, the S&P 500 broke resistance from its late May and early June highs with a surge above 1110 this week. The index also moved back above its rising 200-day moving average for the first time since mid May. Despite big moves from this stock market benchmark, the Gold ETF (GLD) and the 20+ Year Treasury ETF (TLT) held above their respective support levels. Chart 5 shows gold and bonds moving higher as the Euro and S&P 500 move lower in May. Stocks and the Euro bounced over the last seven days, but gold and bonds did not decline much and remained close to their highs. Something may need to give here. Either the stock market rally fails or money starts moving out of bonds or gold.
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Chart 5
20+ YEAR TREASURY ETF CONSOLIDATES ABOVE RESISTANCE... Chart 6 shows the 20+ Year Treasury ETF (TLT) surging in April-May and then consolidating the last few weeks. The ETF remains above its early June low and has yet to break support. This consolidation could evolve into a triangle formation, which would be viewed as a bullish consolidation. A break above triangle resistance would signal a continuation higher. Such a move would most likely be bearish for stocks. Key support for TLT is set at 95, which marks the early June low. A break below this level would be bearish and argue for a deeper pullback, which would be positive for stocks. Bonds opened strong after the Producer Price Index (PPI) declined for the second month in a row. However, bonds weakened throughout the day as the stock market rallied. Falling producer prices is deflationary, not inflationary. The Consumer Price Index (CPI) will be reported on Thursday morning.
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Chart 6
TREASURY YIELDS TRACK COMMODITY ETF ... Chart 7 shows the 10-Year Treasury Yield ($TNX) breaking support around 36 (3.6%) and declining below its December low in May. After becoming overextended on the downside, $TNX consolidated and formed a triangle of sorts. Watch the triangle boundaries for the next clue. An upside breakout would be bullish for rates (bearish for bonds). A downside break would be bearish for rates (bullish for bonds). Remember, rates and bonds move opposite. Also notice that the 10-Year Treasury Yield tracks the DB Commodity Index Tracking ETF (DBC) quite well. Rates generally rise as commodity prices rise and fall as commodity prices fall. It should be pointed out that DBC is heavily weighted towards the oil complex. Brent Crude, Heating Oil, Light Crude and Gasoline each weigh 12.38% and together account for around 50% of the index.
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Chart 7
GOLD AND SILVER CONSOLIDATE NEAR RESISTANCE... Even with a sharp advance in stocks and the Euro the last seven days, chart 8 shows the Gold ETF (GLD) holding well above support and consolidating near resistance. The ability to maintain gains and hug resistance shows continued buying pressure. With the trend clearly up here, the odds favor a breakout and continuation of the uptrend. Medium-term, it would take a break below the mid May low to reverse the uptrend. Short-term, I will be watching last weeks low. After a decline last week, GLD established support around 119 with a bounce over the last four days. A break below last weeks low (118.83) would reverse the three week uptrend and keep GLD within its six week trading range.
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Chart 8
Chart 9 shows the Silver ETF (SLV) hitting resistance from the early June high. Silver is underperforming gold over the last few weeks. After a sharp decline in mid May, the ETF consolidated the last four weeks with support around 17 and resistance just above 18. These boundaries hold the key to the next move. Being a more industrial metal than gold, silver may be more influenced by the stock market (economy).
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Chart 9
GOLD MINERS ETF ADVANCES WITHIN RISING WEDGE... Chart 10 shows the Gold Miners ETF (GDX) within a clear uptrend that is defined by a rising price channel. GDX exceeded the upper trendline with a surge in early May and came crashing down in mid May. Since the mid May low, GDX has been working its way higher with a rising wedge the last four weeks. Right now the trend is up with no signs of weakness. In fact, GDX was one of the leading industry group ETFs on Wednesday. The lows of the last two weeks mark support around 49.5. A move below these lows would break wedge support and provide the first sign of weakness. This would also raise the prospect of a lower high (below the May high). The indicator window shows the GDX:GLD ratio, which measures the performance of GDX relative to GLD. Relative strength was dealt a setback in mid May, but the price relative has slowly rebounded as GDX forms the rising wedge. A move below the June low in the price relative would show relative weakness that would be negative for GDX.
