I have only been away from my charts for a little under two weeks and what a cycle it turned into with the Dow Jones Index down every single session right up to Friday.
But the whole game has turned into currency moves dominated by the strength of the US dollar. And just when everyone has started to get used to the new set of rules, it is likely to change this week as the US dollar has put in what looks like a very neat top. If this is the case, then it would be very good news for commodities and in particular gold. I am really impressed with the way gold stocks are continuing to outperform gold itself. Mind you in Australia, the gold stocks have been helped by a very weak Australian dollar. This throws up another conundrum – if the US dollar rolls over then we might rightly expect a rally in the Australian dollar and what will that do to gold stocks? In the background, our friends the Commercials have the lowest net short position in gold since 28th July, 2017.
Crude was a highlight at the end of last week as well. Such a bullish move.
I have mentioned before that the performance of the Russell 2000 keeps the dream alive. This index has raced through to new all-time highs over the past week while at the same time meeting up with a line from all the tops since late 2015 – just perfect. No matter how many years I have been doing these blessed charts, I still cannot believe that the market knows exactly where these lines are – and respects them.
Added to this - I don’t think I have ever seen such bifurcated markets. Any wonder this word has been getting a number of mentions when markets are split in so many directions. Some sectors of the New York market came off taking in the full counts from the upslanting wedges mentioned earlier while others – such as the RUT – continued on higher (as I said above, keeping the dream of longer term higher levels alive). Then we have the performance of Asia – dreadful – but whereas at the end of January when the Shanghai market broke, it led the whole world lower, on this occasion investors were a little more wary. Interesting that when the “bucket” didn’t work at the support level in the Shanghai market, the Chinese authorities have moved over the weekend to change the banking rules in an effort to try and put some sort of floor under their market. This should be another plus.
The currency ramifications have resulted in quite a bit of, shall we call it “hot money” coming Australia’s way. Mind you, I don’t think many of us would care if it was hot or not – just anything to get the banks to show some life which they certainly did late last week.
The support for the banks did wonders for the XJO which has attracted quite a bit of attention hitting ten year highs. But, as I keep mentioning, if we have looked past the leaders over recent months, Australia has been a top performer something that the XMD Index has demonstrated clearly – new all-time highs again last week. However, the usual selling associated with the end of the financial year hit quite a few of the stocks in the speculative end of the market. Final week of June is often a very good time to make some judicial purchases in this area!!!
(20min delay)