What an amazing week that was. In trying to do a summary of my charts, it is difficult to know where to begin. I swear I could write a book on last week’s movements but I am sure you will be pleased that I will try to restrict it to just a few paragraphs!
Further new highs on Wall Street but such an achievement was not accomplished by the Russell 2000 and the Trannies which is just one of a number of divergences that are building. As well, the S&P has got very overbought. But as we have seen, every effort has been made to keep the show on the road – well at least until November - but a correction is coming even if it won’t be as big as many might like. Some of the charts on Wall Street are just amazing – I can only marvel at the perfection of the weekly Dow (semi-log) and the daily of the NASDAQ Comp. Any wonder that at times I have mentioned that there appears to be a silent hand at work in the markets - well at least in the charts.
Gold was a stand-out feature when it ran up to $1610 on the news from the Middle East but a lessening of the tensions saw the price ease back. Last year’s trading will now act as support as this market consolidates. However, it is silver that I am watching closely. It has formed what looks like a really nice base pattern and is likely to signal when the next move in precious metals will get underway. The fact that stocks did not perform as well as gold itself on last week’s dramatic action, also suggests that we should see a further consolidation.
I have mentioned previously that I think the most important chart this year is going to be the yuan against the US dollar. The yuan has been strengthening. Weakness in the US dollar is just one of the features of what I have dubbed my trilogy “gold breaking its downtrend, US dollar threatening to break downside from a top pattern while the printing presses are being revved up”. I believe this whole situation is very important as I think there are moves afoot in the markets to weaken the US dollar’s position as the world’s reserve currency.
Strength on Wall Street helped our market also record a new high. XMD (Midcaps) might not be everyone’s “go-to” index when analyzing the Australian market. I like it because it hit a new all time high last year and it is a good cross section of the economy without the heavy weighting of things like the blessed banks that have been so horrid for so long. As well last week’s strength takes the XMD out the topside of a large pattern that will now act as support on any weakness. However, sad to say, even such a nice chart is still going to be governed by what happens on Wall Street.
Noticed that zinc was starting to show a little bit of strength at the end of last week. This market is often an early indicator so worth watching to see if it can carry through here.
And a market to ponder – the BDI (Bulk Dry Index). There was a time when the trend of this index and BHP were fairly closely aligned. Admittedly that was quite some time ago but I still like to keep an eye on how the BDI is travelling. All the talk on trade, as well as new environmental restrictions that have come into force on ships, are likely to be having an effect but the BDI it is only a third of where it was just a few months ago. Is this suggesting that trade is a lot worse than we think? Worth just keeping a look at what is happening in this rather obscure market.
I am about to have a belated Christmas with my family so won’t be back till the beginning of February. And the way the markets are currently behaving, it looks like I am going to miss some “exciting” developments! Good luck – you are going to need it….
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