Gold Is Below Its Golden Cross, Bonds, Utilities Rally

NEW YORK (TheStreet) -- Comex Gold ($1294.5) had a golden cross on Wednesday when its 50-day simple moving average at $1,304 crossed above its 200-day SMA at $1,299. The day's low at $1,299 held this key support, but this morning gold is below the crossover. 

A 'golden cross' occurs when a short-term simple moving average crosses above a longer-term simple moving average for any market or stock. A 'death cross' occurs when the 50-day SMA falls below its 200-day SMA

The 50-day had been below the 200-day when a death cross occurred on Feb. 25, 2013, with gold just below $1,600 the Troy ounce. On Feb. 17, 2009, gold had a golden cross trading just below $975. The 50-day stayed above the 200-day until April 19, 2012, with gold at $1,650 as shown on today's daily graph for gold. 

Courtesy of MetaStock Xenith

Gold needs to rally to a weekly close above its five-week modified moving average at $1,312.80 to avoid having a negative weekly chart. This would also sustain the golden cross on the daily chart. Note that the 2014 high for gold was $1,392.60 set on March 17. This high was quickly reversed under the 'power of the pivots' at $1,385 and $1,373.

The Treasury market is experiencing a flattening process where the yield on the 2-year note rises and the yield on the 30-year bond declines. At the end of 2013 the spread between the 30-year yield and the 2-year yield was 358 basis points (3.964% - 0.384% = 3.58%). Today this spread has flattened to 310.6 basis points (3.552% - 0.446% = 3.106%). The 30-year yield is down 41.2 basis points with the 2-year yield up 6.2 basis points. The reasons for this process is that bond traders are anticipating that the Federal Reserve will begin to raise the federal funds rate a year from now, and traders are reversing their yield curve steepening trades where they were long the 2-year note and short the 30-year bond.

The Dow utility average (522.00) is up 6.4% year-to-date vs. a scant gain of 0.2% for the S&P 500 (1852.56). The 2014 high for the utility average is 528.03 set on Feb. 24 vs. its May 2013 high at 537.86. Semiannual and annual value levels are 504.74 and 497.53 with a semiannual pivot at 524.37 and annual risky level at 548.70.

Let's review the bond, gold and utilities ETFs we have been tracking.

iShares 20+Year Treasury Bond ETF (TLT) ($109.44) trades like a stock and its components are Treasuries with maturity dates longer than 20 years. The bond ETF is above its 21-day, 50-day and 200-day SMA converging at $107.77, $107.11 and $106.10 and traded to a new 2014 high at $109.47 yesterday. The 50-day crossed above the 200-day on March 17 when I wrote, Let's Start a Bull vs. Bear Market Debate!

The weekly chart has been positive since the first week of 2014 and its five-week modified moving average is now at $107.58 with its 200-week SMA reachable at $109.66. Weekly, quarterly and monthly value levels are $107.58, $105.67 and $102.79 with annual risky levels at $114.99 and $116.12.

SPDR Gold Shares ETF (GLD) ($125.41) is below its 21-day SMA at $129.13 on an oversold daily chart. The golden cross occurred yesterday with the 50-day SMA at 125.55 above the 200-day SMA at $125.44. The 2014 high at $133.69 on March 14 was a test of my quarterly risky level at $133.61. A potential problem for the gold ETF is that its weekly chart shifts to negative given a close this week below its five-week MMA at $126.73. So there's a tug-a-war is between the golden cross vs. a negative weekly chart.

Select Sector Utilities Sector SPDR ETF (XLU) ($40.62) is above its 21-day, 50-day and 200-day SMA at $40.41, $39.61 and $38.46. The golden cross for utilities was confirmed on Feb. 20 with the ETF at $40.50. The weekly chart remains positive but overbought with the five-week MMA at $40.06. Annual, semiannual, quarterly and monthly pivots are $39.12, $38.88, $38.11 and $38.13 with a semiannual pivot at $40.46, and annual and weekly risky levels at $41.19 and $42.28. The annual risky level was tested at the 2014 high at $41.27 set on March 18.

The first quarter appears to be coming to an end with limited fanfare for the major equity averages.

The Dow industrial Average stalled in the first quarter after setting its all-time high intraday high at 16588.25 on Dec. 31.

The Russell 2000 set its all-time high at 1212.82 on March 4. The Nasdaq set its multiyear high at 4371.71 on March 6. The Dow transportation average set its all-time intraday high at 7627.44 on March 7.

The S&P 500 eked out a new all-time intraday high at 1883.97 on March 21.

Monday is the last day of March and the first quarter. On Tuesday I will have new value levels, pivots and risky levels for April and the second quarter.

Markets will remain under the influence of the same semiannual and annual levels I have been mentioning and thus the 'tangled bowl of spaghetti' continues.

Semiannual value levels are 3930 and 3920 on the Nasdaq with semiannual pivots at 16245 Dow industrials, 1797.3 and 1764.4 S&P 500, 7376 and 7245 Dow transports, and 1133.29 and 1130.79 on the Russell 2000, and the semiannual risky level at 16860 Dow industrials. All pivots mentioned have been crossed at least once so far in 2014. The Nasdaq value levels have yet to be tested as the Feb. 5 low was 3968.19.

If a stock market top is confirmed the risk is to the annual value levels at 14835 and 13467 Dow industrials, 1539.1 and 1442.1 S&P 500, 3471 and 3063 Nasdaq, 6249 and 5935 on Dow transports and 966.72 and 879.39 on Russell 2000.

I am on the bear side of the bull vs. bear debate as my prediction for 2014 remains that the major equity averages will test their 200-day simple moving averages in 2014 now at 15665 Dow industrials, 1746.7 S&P 500, 3892 Nasdaq, 6892 Dow transports and 1094.58 Russell 2000.

There are some negative divergences on the weekly charts, but all five major averages need to have negative weekly charts. This is defined by simultaneous weekly closes below the five-week MMA with their 12x3x3 weekly slow stochastic readings declining below 80.00.

The five-week MMAs are 16225 Dow industrials, 1847.8 S&P 500, 4235 Nasdaq, 7432 Dow transports and 1172.23 Russell 2000.

Weekly closes below 4235 on the Nasdaq and 1172.23 on the Russell 2000 will pull their stochastics below 80.00 which would be negative weekly charts!

At the time of publication the author held no positions in any of the stocks mentioned.

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This article represents the opinion of a contributor and not necessarily that of TheStreet or its editorial staff

Richard Suttmeier is the chief market strategist at ValuEngine.com. He has been a professional in the U.S. Capital Markets since 1972, transferring his engineering skills to the trading and investment world.

Suttmeier has an engineering degree from Georgia Tech and a Master of Science degree from Brooklyn Poly. He began his career in the financial services industry in 1972 trading U.S. Treasury securities in the primary dealer community. He became the first long bond trader for Bache in 1978, and formed the Government Bond Department at LF Rothschild in 1981, helping establish that firm as a primary dealer in 1986. This experience gives him the insights to be an expert on monetary policy, which he features in his newsletters, and market commentary.

Suttmeier's industry licenses include, Series 7 and Registered Principal (Series 24). He has been the Chief Market Strategist for ValuEngine.com since 2008 and often appears on financial TV.

Click here for details on Suttmeier's "Buy and Trade" investment strategy.

Richard Suttmeier can be reached at RSuttmeier@Gmail.com

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