Global traded markets worked their way back toward this week’s opening prices in trade on Monday, which is where equity and currency markets sat ahead of last Friday’s Non-farm Payroll employment report from the US. Asian equity markets absorbed selling pressure on the first session of the week, and managed to hold support as European and US equity trade found buyers in the pre-market. Equity cash trade reversed the bullish futures tone, and sent S&P 500 (SPY) values back to test 1315, in a very disjointed period of cash trade that looked to be desperately searching for sustainable momentum and sentiment reads.
Precious metal trade saw gold bullion futures break 1440 on Monday, in-line with silver bullion markets taking out resistance at 36.50. The Sentiment and Momentum Indicator (SMI) alert sent out to clients to get long silver, with a break of 34.60, has completed its upside targets at 35.10. Traders will now be looking for consolidation, and a new signal to form. Now would not be the time to be looking to get long gold or silver bullion at current extended levels, as a pull-back to support is required so that the potential strength of the next leg higher can be gauged.
West Texas Intermediate WTI oil markets moved higher to test 107.15 in overnight trade, which completed the SMI alert sent out on Friday, looking for a long break of 102.05 that has now hit both target areas. The speculative nature of recent oil market trade, which has hedged the potential disturbance to crude production, has formed a solid long trend that will be very difficult to easily reverse back below $100 a barrel on WTI. A move to test the strength of support around 102.50 is the likely course of trade, before oil markets can then easily make a sustainable break towards 110.00.
Interest rate markets have gone through a very sporadic period of trade, which has seen the 10-year Treasury note value drop to test 119.00 support. The converse reaction to that move has been for interest rates to climb higher, which will be against the desires of the Federal Reserve to maintain a low interest rate environment in which to manipulate US dollar values. Equity and interest rate market correlations are testing their historical norms, in-line with global market correlations that have spent the last three months resetting themselves, and finding fair value.
The dollar index found a support area at 76.00 in trade on Monday, after having absorbed long sided moves in global commodity and precious metal markets, which historically would have created a stronger negative impact on dollar index trade than has been seen recently. The last three months of trade have been seen dollar-based asset classes testing the resolve of historical inverse inter-market correlations.
The move toward the dollar in near-term trade on Monday, after bouncing off support, is not likely to be motivated by desire to the long the US economic outlook, but more likely to be in reaction to those central banks that control exporting economies that will now be looking for regional currencies to lose some of the recent gains. In general, it would seem that a period of consolidation is taking place in equity trade, with equity buyers having their attention drawn to bullion markets, and it would seem that a test of upside resistance on the dollar index towards 77.00 may be in order during the first part of this week’s trade.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
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