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Wednesday, February 27, 2013

The ‘Smart Money’ is Headed for the Hills

Uncertainty is the killer of rallies, and the markets are nervous

Later the market was pushed higher by a report from the Commerce Department that new home sales posted the biggest monthly jump in nearly two decades in January. And U.S. consumer confidence improved to the highest level since November, according to the Conference Board.
At the close, the Dow Jones Industrial Average had gained 116 points at 13,900, the S&P 500 rose 9 points to 1,497, and the Nasdaq jumped 13 points to 3,130. The NYSE traded 772 million shares and the Nasdaq crossed 447 million. On the Big Board, advancers were ahead of decliners by 1.8-to-1, and on the Nasdaq, advancers led by 1.5-to-1.

Trade of the Day Chart Key
Gold had its best day since November, up 1.8%, to settle at $1,615.20. Note that the SPDR Gold Shares (NYSE:GLD) rose $1.88 to $156.22. However, massive resistance begins at $160, and so the rally is merely a “rebound.”

U.S. Treasury bonds continued a rally that began on Monday (prices rise when yields fall). Traders in the bond markets predict that the 10-year bond could fall to 1.8% or lower. The 10-year closed Tuesday at 1.886%. 

The S&P 500 is undergoing a consolidation with support at 1,475, which is also the current close of its 200-day moving average. Immediate resistance is just above Tuesday’s close, at 1,500. The next resistance is at 1,515.
Conclusion: The charts of gold and the 10-year Treasury bond indicate that the “smart money” is heading for the hills. Uncertainty is the killer of rallies, and despite the Fed’s efforts to “put a good face” on the economy, the markets are nervous. Bernanke’s appearance before Congress was a good show, but the show doesn’t overcome some serious and immediate problems, i.e., sequestration and Italy’s failed elections.

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