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Why the Big Picture Says to Sell Gold

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Exit the long-side trade in gold that was recommended last week at $1,100.

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Summary of Yesterday's Notable Technical Developments

Bonds fell Friday giving back some of Thursday's gains; the yield on the benchmark 10-year Treasury closed at 3.54%, right where it began the week, after reaching as high as 3.62%.

Stocks finished the day higher Friday after some volatile trading and heavier-than-average volume due to quadruple witching; for the week, they finished lower despite the Dow and NASDAQ making new 2009 highs in the middle of the week.

Commodities finished slightly higher Friday and for the week as crude oil's rise gave the entire complex a boost; the DBC still remains well below resistance at $25, though.

The US Dollar Index finished only slightly higher on Friday after reaching as high as 78.10. For the week, the index was up more than 1.5% as it conquered a couple of minor resistance levels and caused the "Dollar Bears" to run for cover.

Market Internals
(Figures are rounded)


Critical Market Components

S&P 500:
the first meaningful support is the ascending 75-day moving average (currently at 1075.29); the next meaningful resistance is 1139, which is a convergence of Fibonacci levels; will a breakout of this recent trading range occur in the last two weeks of 2009?

NASDAQ: the critical level on a weekly closing basis is 2212.49 -- the NASDAQ finished last week at 2211.69 after attempting to break out earlier in the week; support is at the low from December 17 at 2178.05; next resistance on a confirmed breakout is 2231.02 -- a 61.8% retracement of the 2008-09 bear market; NASDAQ and semis are really asserting themselves as the leadership areas of the market.

Dow Jones Industrials: support at rising trend line at 10,285.97; resistance at 10,507.59 on a weekly close remains unchanged; 10,231.30, the bottom of the recent sideways action, is next target on the downside on a break of trend line support; look for possible seasonal window dressing here as we close out 2009.

10-Year US Treasury Yield: support raised to horizontal line at 3.483% (December 4 closing high); short-term resistance is now the 3.62% intraday high that was set on December 15; above that on a breakout, the resistance will be the 3.78% to 3.88% range -- the wave iii of 5 target.

Commodity ETF (DBC):
support at the 80-day moving average at 23.33; substantial resistance at 25; commodities were boosted by crude oil last week -- counteracting the effects of a stronger dollar; I view that as a short-term phenomenon and that the DBC is likely headed to its uptrend line support at 22.75.

US Dollar Index (DXY): new short-term support at previous resistance of 77.47; next short-term target is the congestion area at around 78; the intermediate-term target is the 80 to 81 area; the DXY is clearly in a short-term uptrend so use every countertrend move to buy PowerShares DB US Dollar Index Bullish (UUP) and/or to lighten up on "risk assets" like stocks and commodities.

Semiconductor Index (SOX): the SOX bullishly broke out above what was fairly staunch resistance at the 339 area and managed to hold that breakout into the weekend; while the long-term wave count I had for the SOX doesn't change with this breakout, the short-term dynamics do; the new ultimate target on the upside is at 366.52 (Fibonacci projection) with a max upside of 384.28 (bottom of first wave lower from July 21, 2006); horizontal line support exists at 332.11.
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No positions in stocks mentioned.

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