Wednesday, December 23, 2009

Chart of the Day: Gold Bounces Off Support Levels

The chart above shows the pullback in gold prices, which are now nearing support levels. The red line I have drawn in represents what had been former resistance levels around $1075. That former resistance is now acting as support, and gold is attempting to bounce from these levels.

I trimmed half of our gold etf (GLD) positions at higher levels, but yesterday I added back a little to play a potential bounce. I don't plan to add back all of our exposure to gold until I see it hold support. Often times there is an initial bounce, and then a pullback to retest said support levels. If this occurs, the second pullback would represent a better entry point. We shall see.

After the close last night, Micron (MU) and Red Hat (RHT) both beat earnings expectations, and both stocks are nicely higher this morning. Tech is leading the action so far, and energy and materials are strong as well. Financials and healthcare are lagging right now.
On an unrelated note, despite the widely heralded coming collapse in commercial real estate, the real estate etf (IYR) is making new highs for the year right now. I continue to think that with so many people focused on the CRE issue, and waiting for prices to come down, that the final wave will prove uneventful relative to expectations.
Despite yesterday's strong existing home sales report, I have said that the housing data (like the jobs data) is likely to be lumpy at best. So today's new home sales report is disappointing, but I don't think any single housing datapoint should be viewed in isolation. New home sales fell -11.3% last month, but the overall picture for housing in this country is still ameliorating.
Asian markets were higher overnight, led by a +3.2% spike in India after the Finance Minister said the economy may accelerate at a a faster pace; the 10-year yield is lower to 3.72% after spiking to 3.75% yesterday; and the VIX is now below 20, hovering at new lows for the year around 19.75 right now.
Trading comment: The S&P has joined the Nasdaq in making new highs again. I think the markets should hold their bid into year-end, so I am going to try to hang on to my positions and refrain from taking profits until the New Year. A lot of people are already talking about a correction in January. As a contrarian, it always makes me nervous to run with the herd. So if the calls for a correction grow too loud, I would be more apt to fade it.
long GLD


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