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Bright Spots In The Week As The DOW Drops 318 On Friday

|Includes:AGNC, GDX, GLD, HL, IVR, MORL, SAND, iShares 20+ Year Treasury Bond ETF (TLT)

[see my jan 28 update at the bottom of this blog referenced in my 1/28 stock talk]

I didn't hear anything about today's steep market drop of Dow -318 points and S&P -38 until I got home from work. I looked things over and sort of analyzed what seemed to be significant to me. I happened to notice a couple sectors that did not go down.

The month of December was a turning point for two areas of investment interest with a double top for one and a double bottom for the other.

  1. Interest rates completed a double top on Dec 31 and now appear to be trending lower;BOE Interest Rate 10-Year T-No (^TNX)
  2. Gold completed a double bottom Dec 19 and now appears to be trending higher. Looks like the interest rate correction is over; at least it looks like it should be obvious now. SPDR Gold Shares (NYSEARCA:GLD)

It looks like the interest rate correction is over, or in other words, it looks like rates have topped out for now.

I had considered buying (NYSEARCA:TLT) when it hit $102 at the end of December, but did not act on it. It has now run from $102 to almost $108 having gained almost 6% in a little over three weeks from Dec 31 to Jan 24.

With the article below announcing the obvious recent strong performance if Treasurys, you can look for profit taking in TLT to commence soon.

Article: Treasurys surge as investors shed risk

NEW YORK (MarketWatch) - Treasury prices surged Friday, closing out their second consecutive day of gains as investor fears over global economic growth triggered a rotation out of riskier assets like emerging markets and into haven securities like U.S. government debt.

Treasurys surge as investors shed risk Ben Eisen. Jan. 24, 2014

Any correction for TLT would probably only go down to $104 to $105. Probably will not see $102 again but $104 would be a good point to take a position.

Rotation into Gold and PM miners is becoming apparent.

With the overall market down a stiff 2% today (1/24/13) gold was steady in what appears to be an ascending triangle (look at hourly chart). Mining stocks were only down fractionally.

Gold is firmly above its 50 day MA now.

Daily Gold chart courtesy of StockCharts

StockCharts gold

China and Asia Down. Gold holding as a store of value.

Article: Asian shares fall on weak China data, stronger yen. Asian shares soften on gloomy China manufacturing data, stronger yen

finance.yahoo.com/news/asian-shares-fall...;_ylt=A2KLOzG_FuNSSxoAuJiTmYlQ

It is somewhat of a disconnect to see China and emerging markets fall today while gold held up.

If the thesis is that China and Asian buyers are supporting gold, it appears to be vindicated today with the Asian stocks falling while gold held up with no loss. The Asian investors DID NOT sell their gold.

(GLD) was up $0.50 today.

(NYSEARCA:GDX) Down only five cents today. (NYSEMKT:SAND) was actually up 0.11 today or 2%.

GDX daily chart, one year with averages.

The market action of gold is following the course that I discussed in my December 19 article which came out the same day that gold made its recent double bottom. "Gold Completing Bottom as Cyprus Decides not to Sell."

seekingalpha.com/article/1907421-gold-co...-sell

Another Sector that held up today:

REITS and mREITS

Notice December 30th was the turning point for interest rate sensitive investments. These REITs hardly noticed the Friday 1/24 318 Dow dive:

(NASDAQ:AGNC) down .03 but is up 10% since Dec 30. Yield is 12.8%

(NYSE:NLY) unchanged, up 8% since Dec 30. Yield is 11.8%

(NYSE:IVR) down .07, up 8% since Dec 30. Yield is 13%

(NYSEARCA:MORL) 2x leveraged down .22 or 1%, but up 18% since Dec. 3. Yield is 24%. Yes, that's a 24% ttm yield. Would double your return in less than 3 years.

Turning point for Gold and interest rates - new short term trend.

Gold [up] and interest rates [down] turned, between Dec 3 and Dec 30.

I take this to be a new trend in which we will see gold continuing to rise maybe another $100 and interest rates continuing to ease or at least to not continue going up.

For this reason, the REITs listed above should continue to do well.

That's all for the moment. I have to get some coffee and read some comments.

This is the content of two emails I sent to my brother discussing my take for the near term probability of gold's next move:

Jan 28, 2013

My take on GLD, HL, GDX, AXU

Gold is getting ready to break out of bottom range. I look for gold (GLD) to correct sideways or horizontally without going down too much, staying mostly around 120. Then the mining stocks will have paused and given back a little. I think I will buy some GDX and SAND especially if they settle a little more. The Slow Stochastic for GLD is turning down a little; give it a little time - there may be a few days of slight decline - then the move. The basic technicals are all positive.

I like using the 20, 50, 200 averages together on a Yahoo chart for GLD. RS and MACD are positive.

I don't know why Avi can't see it.

John

When you look at HL and AXU again, keep in mind that they will have their rather sharp movements, but look at a chart of GLD and notice how it is much less volatile. They are fluctuating up and down more as GLD makes smaller movements. HL and AXU will have their up and downs as GLD corrects sideways/horizontally in a more gradual manner. This is one reason I think there has been a bottom, because gold's downward momentum is virtually gone. It is stealthily creeping up. GLD will find support at the 50 day MA and bounce from there at 119 to 120, and then from there, the bigger move will take place.

I am thinking there will be a few days of sideways to slightly down. I would be looking hard at things [to consider buying] if GLD gets to $119. Draw a Yahoo chart with 20, 50, and 200 averages. I like the cross-over of the 20 over the 50.

Direct Link back to

Interesting Times for All Commodities blog:

seekingalpha.com/instablog/5038891-inter...?source=kizur_seekingalpha

Disclosure: I am long GDX, AGNC, IVR, MORL.

Stocks: TLT, GLD, GDX, AGNC, IVR, MORL, SAND, HL