“U.S. dollar net longs rise to highest since early March 2020”
Interesting though isn’t it how everything seems to come together at one time. Only last week in my notes I was suggesting that seeing as there is so much new speculative money swooshing around the markets, we had to be careful of such things as a “fat finger” episode and I had hardly even got to post my notes and we had something that was definitely weird in the gold market. A report I saw suggested that someone had placed a huge sell order in the futures market. I can’t help being somewhat suspicious that this was what happened – could it have been a deliberate action to trigger all the stops when the gold market is probably at its most vulnerable in the whole 24 hours. Whatever it was it was certainly successful in clearing out all the stops as we saw a hundred dollar drop in a matter of minutes.
So where does this leave gold now? Following a different track this week, I am including a chart of Tips and on the same time scale the world cash gold price. And as a reminder on Tips:
Treasury inflation-protected securities (TIPS) are a type of Treasury security issued by the U.S. government. TIPS are indexed to inflation in order to protect investors from a decline in the purchasing power of their money. As inflation rises, TIPS adjust in price to maintain its real value.
So, we are back on the inflation subject. Over the longer term there is a definite correlation between gold and Tips. For our analysis here today, I have taken both markets back to the beginning of this year. There was a pretty good correlation between these markets until July when we saw the gold price continue sideways but Tips broke topside and had a sharp move up in a pretty little wedge pattern, getting overbought in the process. Tips then started a correction and obviously started to weaken the ground under the gold market which accompanied by a slight strengthening of the US dollar set the stage for this past week’s drama. Gold does have a fairly nasty habit of always liking to clear out the shorts at lows so there is good chance that this has happened again. So, I think besides watching the US dollar, we need to keep a very close watch on Tips as well as this is likely to reflect inflation concerns.
And going back to the US dollar, at this stage it is looking like it is failing to break topside but a bit early to be completely convinced so again, important how it trades over coming days.
At the close of the week, we again had some of the indices on Wall Street scoring new all-time highs but as has happened each week, the money is moving across different groups. My Geniuses are at 97% again so they are somewhat restricted. But interesting that despite the new highs on Friday there was again more money going into falling stocks than rising stocks. I know that this has been happening for some time but it is “normally” an indication of inherent weakness in the market. And it is also interesting that the Fear and Greed Index which had been showing a fairly high level of fear, gradually sentiment in this indicator is picking up so that it finished the week in neutral. Markets don’t normally top out when there is great fear about – that is usually more likely to be associated with lows.
The XJO had a good week but is getting itself caught up in a tight corner on the monthly chart. Note the tram tracks picking up all the highs since 2010. By the end of last week the index was right up into the very top of this channel. Can it burst through? Perhaps - but I can’t help feeling somewhat cautious here.
(20min delay)