Pro Perspectives 8/29/19

August 29, 2019

Global stocks were up big today.  Global yields were up, and commodities were up (with the exception of gold). 


As we've discussed, stocks set the tone for global sentiment in this environment (across financial markets, policymaking and economics).  Global policymakers are well aware of this (from the Washington to Tokyo, from the Fed to the BOJ). 

With that in mind, we've talked in recent days about "plunge protection" that has appeared in stocks, since Trump and Mnuchin had an emergency call with the heads of the big banks.  And the Bank of Japan (already of an outright buyer of global stocks), has also likely been a contributor to the cause (following a one-on-one meeting with Trump at the G7 meetings last weekend).

So, as of Friday, the world was looking particularly chaotic, with Trump's verbal assault on the Fed, and an escalation of trade sanctions exchanged between the U.S. and China.  

Four business days later, and there have been few (if any) improvements to the situation.  Moreover, for the doom and gloom crowd, we've had a deepening of the yield curve inversion this week.  Still, stocks wouldn't/didn’t crack.  

As I've learned over 20+ years of macro trading, what can't go down, will go up.  Stocks couldn't go down.  And now we have a surge up today.  That quickly influences the risk-mood.

Believe it or not, we've now fully recovered the losses in stocks that were triggered by Trump's tweet on Friday.  

And now we're approaching a big technical level in stocks.  
You can see the sharp decline that started August 1st, from the all-time highs, triggered by another Trump tweet (the announcement of tariffs on another $300 billion in Chinese imports).  If we get above this key 2940 area in stocks (the yellow line in the chart above), we could see record highs again, soon. 

Clearly, Trump has had little trouble manipulating both sides of the stock market. 

That (manipulation), along with global central banks back in aggressive easing mode, has been a greenlight to own gold.

With that, gold traded near six-year highs again today.  But we end the day with a sharp reversal. For technicians, gold put in a bearish technical reversal signal today (an outside day). 

With stocks and yields moving higher, gold may be in for a small retracement (which would be a buying opportunity).


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