china

Gold gets pummeled!

Posted on by George Mahfouz

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 🙂

~George

Best week of the year…

Posted on by George Mahfouz

Stocks posted their best weekly showing of the year erasing almost half of the losses that occurred in May. The Dow Jones Industrial Average (chart) soared 3.59%, the Nasdaq (chart) +4.04%, the S&P 500 (chart) +3.72% and the Russell 2000 (chart) finished the week up 4.30%. This snapback rally was on the heels of China making a surprise interest rate cut on Thursday.

Up until this week, equites had been under immense pressure due to the European debt crisis and more recently our own country’s weakening economic picture. In last week’s blog I eluded to the potential of the global central banks stepping in and placing a floor under the markets with additional liquidity measures, and sure enough China was the first country to act. This was followed up by our own Federal Reserve reiterating to Congress thier commitment to intervene should the economy here continue to falter.

To sum up the latest actions by the global central bankers and it relates to equities, at the very least stability should come into the marketplace with the potential to recharge the bull run we had been on. In addition, I would expect that gold becomes a huge beneficiary from the heightened debt levels that are on the balance sheets of central banks around the world.

That said, at some point and time and probably sooner than later, the economies from around the globe will have to be able to stand on their own two feet. Central bankers can only do so much before the stimulus programs begin to have an overall negative effective on the economy and markets. Good luck to all.

Have a great weekend 🙂

~George