What a mess the markets were after Friday’s session. Trying to tie it all together is like attempting to complete a jigsaw with some of the wrong pieces. It just doesn’t all fit. US dollar up – rates down. It was just the other day that everyone was having a panic about the US ten year bond getting over 3% but now it is back to 2.93%. London looks to have topped after having benefited from the pound being very weak but individual markets don’t normally top out alone – usually there is a common thread that runs through all markets.
And commodities – what a mess they were on Friday mainly being led by a sharp fall in the oil price after OPEC decided they have not been able to take a place on the main stage for some time.
And then there was Wall Street. I had been impressed last week that on two occasions, the S&P had recovered to finish little changed after sharp falls. However, I’m starting to wonder if Wall Street might be about to start a northern summer period of volatility with fairly wide swings both up and down with no real progress. More just a nerve wracking series of sharp falls and subsequent rallies. Everyone will get excited about a push to new highs on every rally, only to have confidence smashed on each decline. Something to really look forward to!!!
And then to top it all off, we have to mull over it for an additional day with Wall Street taking time off on Monday.
As mentioned on Friday, the rally in gold in the previous session had unfortunately only taken the price up to the short term downtrend before turning down. The price is really caught here – it tries to go up and the resistance is heavy above around 1308. Then when it comes off the support below about 1295 is really strong. We just need it to be able to break free of both bands. In the meantime, as I keep saying, I have been really impressed by the performance of our gold index. It broke topside on that marvellous run our gold stocks enjoyed and has since come back to sit on support and is bouncing in this area. There is some supporting factors in the background for gold such as the level of shorts by the commercials which is now at the lowest level since July 2017– these are the guys that normally know what is going on and if they are covering their short positions, it is worth taking note.
But ultimately our gold stocks can’t do it on their own – they will need gold itself to take the lead.
And iron ore was down again. Hasn’t broken down but goodness me it is making me nervous. And then coal. I mentioned earlier in the week that the coal price had turned down when the Chinese decided that the price was too high. Near months haven’t taken much notice but the distant months obviously can see a bit more trouble on the horizon.
XJO ended the week stuck in this narrow band of the past few days. MQG touched another new high. Might not be everyone’s favourite stock but I have always maintained that if all is right with Macquarie, all is right with Australia. Hope to hell it is going to work again. If my analysis of Wall Street is somewhere near right and we are going to see some wide swings, there are going to be opportunities here but it will be tough.
(20min delay)