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Futures fractionally lower

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Equity futures are fractionally lower across the board this morning with S&P futures lower by 1, NASDAQ futures down 2 and Dow futures are off 8. Fair value today is $9.82 with buy programs set at $11.86 and sell programs set at 7.68.

Bond Yields fractionally higher

Currently we're seeing bond yield edging fractionally higher in the 5 (FVX.X), 10 (TNX.X) and 30-year bond (TYX.X). Traders should continue to monitor yields from time to time today. Yesterday we saw the Gold/Silver Index (XAU.X) surge higher by more than 5% and that should have traders alert. We're not sure what is "happening", but are aware of what can happen to stocks when the XAU.X starts moving higher and bond yields fall. So far bond yields have been rising, now we're seeing gold stocks move in line. To me, this means the market is thinking economic expansion as it relates to economic theory.

Gold/Silver Index Chart - last eleven months.

The Gold/Silver Index (XAU.X) by itself doesn't tell us what the market may be thinking, but the above chart does tell us the "gold bugs" are still around. I've adjusted my upward trend (lower right corner) and we'll be monitoring this trend. Notice how the XAU.X rallied right up to it's 200-day MA. While the commodity itself has yet to advance, traders know that stock prices often proceed a move in the underlying commodity. We've seen this type of activity in the oil markets and it may be happening here. Why does gold usually rise? There are several reasons, but one is fear of inflation as investors try to hedge currency. Inflation hasn't been a problem as of late, but the market has a way of seeing into the future.

Watch the brokerage stocks here.

Earnings from Merrill Lynch (MER) came in better than expected and that could have some of the brokerage stocks in the Securities Broker/Dealer Index (XBD.X) active at the open. An active Fed that is cutting rates might see this index continue to benefit.

Jeff Bailey
Staff Analyst

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