Gold gets pummeled!

The price of gold fell below $1,400 an ounce for the first time in over two years. In fact, gold and silver both have lost over 10% of its value in the past two trading sessions. Panic selling has set in with not only key technical support levels being shattered, but fears that Cypress and other European countries may have to sell their gold reserves in order to generate liquidity. In addition, slower than expected Q1 growth out of China also added to the panic selling. This capitulation type selling has spilled over to the majority of the gold miners with the gold miners ETF (Symbol: GDX) chart losing over 20% of its value over the past couple of trading sessions. Folks this type of panic selling is what can happen once technicals and fundamentals breakdown and fear takes over. In looking at the most popular ETF that tracks the price of gold (Symbol: GLD) chart, it appears that a multi-year support zone could be found in the $128.00 area which is now only a few dollars away. However, when you have panic selling, margin call selling, institutional and hedge fund selling, all bets are off pertaining to technicals until the smoke clears and cooler heads prevail.

As far as the equities markets are concerned, this is a big week for Q1 earnings reports. We will hear from the likes of Coca-Cola (NYSE: KO), Goldman Sachs (NYSE: GS), Johnson & Johnson (NYSE: JNJ), Intel (NasdaqGS: INTC) Yahoo (NasdaqGS: YHOO), Bank of America (NYSE: BAC), American Express (NYSE: AXP) and Ebay (NasdaqGS: EBAY) just to name a few.

Good luck to all and have a great week 🙂


Q1 in the books, and what a quarter it was!

Stocks posted one of their largest percentage quarterly gains in years. In the first three months of 2013, the Dow Jones Industrial Average (chart) soared 11.3%, the Nasdaq (chart) gained 8.2%, the S&P 500 (chart) posted a record close to end the Q, and the small-cap Russell 2000 (chart) produced a staggering 12% gain. Who would have thought that the major averages would have such a stellar performance to start the year? Especially when considering the sequester ramifications, the Cypress crisis and the mixed signals that the economy here has been sending.

Now that Q1 is over, will there be an encore performance in Q2? Well we won’t have to look very far but to the much anticipated earnings reporting season which begins next week. In my humble opinion, this Q1 earnings reporting season will be scrutinized like no other. If companies do not demonstrate meaningful top-line growth, this rally could indeed be challenged. At least, this is what logic would say. If you are a perma-bull, I suppose you could surmise that if earnings season turns out as a disappointment, this would give the Fed even more reason to continue its easy monetary policies. Let’s not forget that these policies are why we are breaking records seemingly everyday. There is no denying this bull market has been mainly fed by the stimulus programs the Fed (no pun intended) has implemented over the past four years or so. Sure, a lot of companies were forced to become more efficient during our own economic crisis but at some point in time, the top-line must grow and these markets must be able to stand own their own two feet. The real challenge that the Fed will ultimately face is how to begin to wind down its $85 billion a month bond buying program without rattling the markets. To me, if not handled properly and delicately, this would be the most powerful catalyst to stop this bull market right in its tracks.

Technically speaking, all of the key indices remain extended and near the 70 value level of the Relative Strength Index (RSI). I will remain extremely cautious in the near term when deploying any new capital into the markets especially on the long side. I do, however, expect volitlilty to increase due to the upcoming earnings reporting season. Good luck to all and have a very profitable month.

All the best 🙂