Stocks took a drubbing Friday — yet fell less than 1% for the week — after spiking to new recovery highs, (SPY 287.44) on bad economic news out of Germany. The result: A collapse in bond yields, which saw the 10-year Treasury yield trading below the 3-month yield. This inverted yield curve has preceded recession on seven out of seven occasions since 1969. With the New Economy sector closing higher on the week — and registering 7 month highs vs the Old Economy – no immediate collapse of stock prices is in sight, just yet. A relatively minor decline from these levels should find Fib support SPY 276.90 – 274.80, followed by a bounce into early April, which should put in the final high, provided the New Economy starts to show weakness, which is way over-due. Technically, with the strongest volume in 9 weeks, a Bearish Weekly Squat formed and will project lower levels.
Gold continues to chop around, ranging from a spot low 1298 early in the week, followed by a rally to 1320 resistance, where cartel paper selling drove spot lower, to 1302.50, before bouncing to settle 1313 on Friday. Spot gold strong support 1281 – 1271. The PM’s remain on track for a break-out around mid May, with a spot gold strong close over 1360. GLD Fib support 119.62, GLD Fib resistance 123.99. SLV Fib support 13.90. SLV Fib resistance 14.83. The shares (XAU) tacked in 1.7%, after trading down 1%, and continue to lead the metal. To signify the bullish break-out for the shares is underway, look for an XAU Monthly close over 78.45.
After threatening to break under our 89 line trendlines mid-week, the Dollar held UUP 25.57 and bounced to close unchanged (25.80). A strong close under UUP 25.57 will start a bear phase.