Gold ($GLD) Gains & Best Buy ($BBY) Surprise Winds Down Earnings Season

Strength across Europe’s equities markets set the table for morning gains on Wall Street and stocks are broadly higher into midday Tuesday. The S&P 500 is up 7.81 points to 2190.45 and 3 points from session highs.

Europe’s stocks advanced on preliminary readings from the Purchasing Manager’s Index (PMI) for August. At the same time, on the domestic news front, the only economic stat showed New Home Sales at a 654K annual rate for July and above estimates of 580K.

Yet Treasury bonds are higher despite the strong housing numbers and the yield on the benchmark ten-year has eased to 1.53%.

Meanwhile, crude oil is off 61 cents to $46.80 and gold gained $3 to $1346.50.

Nine of ten market sectors are higher on Wall Street, led by Telecom (IYZ), Basic Materials (XLB), and Consumer Discretionary (XLY). Consumer Staples (XLP) are modestly lower.

CBOE Volatility Index (VIX) is off .25 to 12.02 and options volumes remain rather light. Roughly 3.1 million calls and 2.5 million puts traded across the exchanges through the first two hours. Projected volume for the day is 13 million and 1 million shy of the one-month daily average.

AMD Jan 6 and 9 call options are the most actives due to a large spread trade. Valero (VLO) Weekly 55 puts, Bank of America (BAC) Sep 15 calls, and Chesapeake (CHK) Sep 6.5 puts are seeing interest as well.

Best Buy (BBY) options are heavily traded as the stock rallies 19% to 52-week highs on earnings results. 51K calls and 41K puts traded on the electronics retailer, which is 10X normal.

Beyond Best Buy, the earnings calendar is light and the second quarter earnings reporting season is reaching an end. Economic data is relatively light until the second half of the week as well. Players are also awaiting commentary from Fed head Janet Yellen on Friday. From there, a hefty batch of data looms including monthly jobs data on Friday September 2nd.

The lack of meaningful market catalysts since the previous jobs report has led to choppy and aimless trading across many asset classes, including gold. The chart below shows the recent action of the SPDR Gold Trust (GLD) and the recent consolidation into a narrow range.

See Tradespoon’s Stock Forecast on SPDR ETF Gold Shares (GLD)

Tradespoon’s Stock Forecast on SPDR ETF Gold Shares (GLD)

This coiling or triangle formation in the gold market could potential precede a break out move, as macro news unfolds and as volumes return to normal during the first week of trading in September. This is true, not just of gold, but of Treasury bonds and the S&P 500 as well.

The Gold Fund, which trades under ticker GLD and represents ownership in the actual metal, is facing resistance at $128.50, $129.20, and $130 per share. Key support levels to watch include $128, $127.50 and along the 50-day moving average.

Meanwhile, the S&P 500 is facing resistance at last Monday’s record closing high of 2090. Resistance also likely at 2194, with support possible at 2180, 2175, and 2164.