A great deal of the money and credit needed to fuel the present global boom & bust cycle  results from the yen carry trade, where players borrowed the yen short and invested long, pocketing the difference in the “spread”.

Whenever risk aversion grows strong, carry trades get unwound and stock markets go down. Whenever risk is embraced – carry trades increase and stock markets rise.

During the last two weeks, I was fortunate to start accumulating positions in the Japanese Yen Trust above.

Since that time it, has risen above its falling trend line, while the U.S. stock market took another hit to the downside.

This is another vehicle to play the downside of the bear market with, as they are inversely correlated. Also, the yen tends to trend in the same direction as the gold market.

Bond & Rates

Since April of this year interest rates have been on the rise, in late May they broke above significant horizontal resistance just above 39. They moved to a high of over 43 and are falling back towards the 39 level.

Will 39 hold as support, or will interest rates bounce off of it and begin to rise again, signaling that higher rates are coming?

If I had to guess, I would say the Fed wants lower rates, but that they may get higher rates, at least on the long end of the curve – the Fed can only affect the short end of the curve.

The short end may hold steady or vacillate back and forth while the long end sees higher rates – thus increasing the slope of the yield curve, which the banks need right now as they are approaching their weakest hour.

Commodities keep rising in an almost relentless fashion as the chart below shows.

Some commodities are overbought, such as oil and agricultures, while others have already pulled back and are nearing buy zones: pot, fcx, mon, pcu and others.

Up first is the weekly chart of the CCI, which gives a true picture of the overall commodity markets, as all commodities are equally weighted, as compared to the CRB index that has different weightings.

Gold

Gold had a strong week, rising 27.60 (+3.05%) to close at $931.30 (continuous contract).  Below is the daily chart for GLD. It shows nearly the same gain for the week. However, there is a huge upside gap lurking right beneath the recent move up. Gaps love to fill, but they don’t have to; the question is when and from what level if they so decide.

Price has blown above its downward sloping trend line and is now approaching horizontal resistance just above 92. If gold can break above 92 and resistance turns to support, there is a good shot at filling the gap left back at 96 in March of this year.

If price cannot get through 92 it will most likely drop to retest its lower trend line. If the lower trend line doesn’t hold, a retest of the May low might occur. RSI sports a slight divergence making a new high while price did not.

Silver

Silver had a good week as well, rallying up 0.31 to close at 17.71 for a +1.80% weekly gain. The daily chart below for SLV shows price breaking above its upper trend line and now headed up to test horizontal resistance at 180.

RSI has turned up and MACD and the histograms are just starting to enter positive territory. The biggest question on the chart is: will the gaps need to be filled, and if so – when?

GDX Index

The GDX had a strong week, gaining over 10% to close at 48.29 – a good showing.

The daily chart below shows a negative RSI divergence, which made a new high, while price did not.

RSI and histograms have both turned up nicely. Two large gaps remain to the recent rise, will they be filled or not? Significant overhead resistance is found at the 50 level.

Good luck. Good trading. Good health, and that’s a wrap.

Come visit our website: Honest Money Gold & Silver Report

New Book Now Available - Honest Money

Douglas V. Gnazzo
Honest Money Gold & Silver Report

About the author: Douglas V. Gnazzo writes for numerous websites and his work appears both here and abroad. Just recently he was honored by being chosen as a Foundation Scholar for the Foundation for the Advancement of Monetary Education (FAME).

Disclaimer: The contents of this article represent the opinions of Douglas V. Gnazzo. Nothing contained herein is intended as investment advice or recommendations for specific investment decisions, and you should not rely on it as such. Douglas V. Gnazzo is not a registered investment advisor. Information and analysis above are derived from sources and using methods believed to be reliable, but Douglas. V. Gnazzo cannot accept responsibility for any trading losses you may incur as a result of your reliance on this analysis and will not be held liable for the consequence of reliance upon any opinion or statement contained herein or any omission. Individuals should consult with their broker and personal financial advisors before engaging in any trading activities. Do your own due diligence regarding personal investment decisions. This article may contain information that is confidential and/or protected by law. The purpose of this article is intended to be used as an educational discussion of the issues involved. Douglas V. Gnazzo is not a lawyer or a legal scholar. Information and analysis derived from the quoted sources are believed to be reliable and are offered in good faith. Only a highly trained and certified and registered legal professional should be regarded as an authority on the issues involved; and all those seeking such an authoritative opinion should do their own due diligence and seek out the advice of a legal professional. Lastly Douglas V. Gnazzo believes that The United States of America is the greatest country on Earth, but that it can yet become greater. This article is written to help facilitate that greater becoming. God Bless America.

 Douglas V. Gnazzo © 2008 All Rights Reserved

-- Posted Monday, 30 June 2008 | Digg This Article