Friday, July 1, 2011

Nice rally

Nice rally in the stock indexes the last few days. Is it time to jump back in for the long term. I don't think so. Not just yet. There are a lot of debt issues coming due over the next few months. This last weeks rally was relief over the Greece situation getting kicked down the road again. The U.S. debt situation is on tap for the near future, as is the debt situation in Italy.
Quantitative Easing II ended this week. This was the deal where the Federal Reserve was buying Treasury bonds from the govt. 40% of the govt spending has been financed by the Fed through its purchases of govt. bonds. What will happen to interest rates now that the Fed is out of the picture.
Over the next couple of weeks I believe the stock market will start to contemplate that little problem.
Remember, the indexes are still trading in a range. Don't even think about buying until they make new highs, and hold those highs. And this has been too easy lately.......
Here is a chart of the action in the 10Y US Treasury bond.

This has been hard on the gold and silver markets. Gold and silver have a difficult time in a period of rising interest rates.
I can't help but think that rates rising may make it more profitable for banks to lend, and all of that money that the Fed has been shoveling to the banks may just see the light of day.... That would be a counter-intuitive outcome of rising interest rates. ie, inflation could actually get a foothold due to the money at last getting out of the clutches of the banks.
It may be awhile though.
Here are the gold and silver charts:

Gold has always been a tricky market to trade. It has a way of hitting all the stops and then going the other way. I am not impressed with the selling volume over the last few sessions. Lower on lower volume.....

I'm breaking a few trading rules, but am long silver here. I use Silver Wheaton as my indicator/tell for the silver market. The intraday volume seems to be showing signs of accumulation. It telegraphed the move to the downside, lets see if it works on the upside.....
Control your risks!
Update 7/6/11:
So far so good!

No comments:

Post a Comment

All comments are appreciated as it will give me a chance to adjust my content to any real people who may be out there. Thank you. gh