Gold and Equities Forge Ahead, Treasury Yields Press Lower

As of Friday's close at 10,931, the Dow Jones Industrial Average was only 30 points from fully testing and hurdling its 2005 high at 10,985. At this time, my work argues for a run at new highs, projected at 11,150 prior to the next significant peak. Only a decline that breaks and sustains below 10,900 will trigger initial signals that the current vertical upmove off of the 10/28 low at 10,652 has entered corrective mode.

Key support on any such weakness initially resides at the sharply rising 9 DMA, now at 10,813.

Meanwhile, spot gold prices popped to $499.50 Monday morning, a new high for the current upmove, and a test of the $499.75 high established in Dec. 1987! A close at or above $500 this Wednesday -- the final day of the month-- will trigger longer-term bullish signals that project next to $560.

Our proxy for spot gold on the equity side, NEM (47.62) remains in relatively healthy technical condition, and projects still-higher to the 48.80 area next, as the price structure presses closer to a challenge of its 2 year resistance plateau at 49.50-50.30.

Finally, today, let's look at the long end of the yield curve in the 10 year T-note, which continues to press lower, flattening into the next FOMC meeting on Dec. 13th.

Ten-year note yields have pressed back to critical intermediate-term support at 4.45%-4.40%, after peaking at 4.68% at the beginning of November. Purely from a technical perspective, the stair-step, three-week decline has returned yields to their original upside breakout point (4.40%) off of their April-Oct rounded double-bottom formation.

A sustained break below 4.40% will be our initial sign that the prior bottom formation has been invalidated (which projected a target of 4.90%), also indicate to us that the dominant trend has reversed to the downside.

As of this moment, inability of the yield to hold at, and bottom off of, the rising 50-day moving average (4.445) will be another negative sing that lower longer-term rates are forthcoming, likely into the 4.35% target zone.

Cresting of the 2004-05 housing boom, crude oil prices remaining under $60/bbl., and concern about overall holiday retail sales -- all against a back-drop of perceptions that the Fed is likely nearing the end of its 18-month rate-hike cycle -- represent some of the reasons that are contributing to downward pressure on yields.