Momentum Of GOLD.

The True Strength Index is a low lag-time momentum indicator that can be used at www.FreeStockCharts.com. Generally, it's bullish when the indicator is above zero and bearish when it's below zero. As the indicator is very sensitive and responsive to movements of price, it can be effectively interpreted for buy and sell decisions.

SPDR Gold Shares (GLD) is making new all-time highs last night. So let’s see what the momentum indicator is telling us. Above is a chart of the hourly price action of GLD.

A couple of things are obvious. First, the price performance of GLD has been steadily accelerating for the past six trading sessions. This is significant because it means that as the acceleration begins to slow, price could still continue higher -- but climbing at a slower rate. As the current reading is .45, which is relatively high, I think it's likely that gold will continue to rise while the TSI momentum indicator will begin to diverge (trend lower).

There are a couple of techniques for making a sell decision with this setup. One could simply wait for the TSI indicator to finally cross below zero -- which will be some time from now, or sell when the indicator makes it first divergence (a lower high if price is still going higher). A third technique, and one that you should be forewarned of whipsaw, is to buy/sell when the indicator crosses the moving average (purple line).

For the past four months, Market Vectors Gold Miners ETF (GDX) has been advancing in a pattern of three momentum waves followed by a correction. While there's no guarantee that this particular pattern will continue, it's encouraging to note that we've recently been through both a correction and a consolidation phase and are just beginning a new first wave.

It would surprise me if GDX doesn't ultimately take out the previous all-time high of $54.63. Presently, we observe open gaps in daily trade that may be revisited on a future date. But for now, this looks like a powerful first wave that should logically be followed by others.

Italy, You Are NEXT !

A combination of massive debt, a lack of competitiveness, and a feeble outlook on economic growth may be the reasons that Italy will be the next eurozone nation to fall.

On the debt forefront, Italy’s debt is expected to balloon up to 117.8% of GDP by next year. Although its debt isn't rising as rapidly as that of Spain or Ireland, it's still at an alarming rate. To further add to the nation’s problems, yield spreads between 10-Year Italian and German government bonds widened to 1.58 percentage points, wider than before the bailout rescue plan was put in place. The widening in this yield spread means that investors judge it riskier to buy the debt of Italy than that of Germany and implies that investors aren't confident in the economic health of Italy.

Additionally, credit default swaps on Italian government debt are at record levels, with $10 million of insurance costing nearly $248,000 per year, indicating that elevated risk is present. Lastly, Italy has nearly €1.5 trillion of debt outstanding, making it the third largest debt market in the world behind the US and Japan.

To put Italy’s debt problems into perspective, at current debt levels and interest rates, the nation must spend nearly 4.5% of its GDP per year just to cover interest payments and will likely continue to increase.

To make things even more challenging for Italy, the nation’s competitiveness has been deteriorating. A study conducted by the European Commission concluded that over a 10-year time span from 1998 to 2008, exports of goods and services grew more slowly in Italy than any other country that was a member of the European Union. This decline in competitiveness, caused primarily by falling factory production, has further led to tepid economic growth. With no real policies and procedures to ameliorate this predicament, Italy’s economic growth future appears grim.

In a nutshell, unless Italy’s debt issues are resolved and it figures out a way to boost productivity, its outlook remains bleak.