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Nadeem Walayat Financial Markets Analysiis and Trend Forecasts

The Commodities and Equities Circus

Stock-Markets / Financial Markets 2010 Nov 24, 2010 - 11:49 AM GMT

By: Bari_Baig


The Mystery of Yellow Metal: We’d be very much interested in seeing how Gold trades today. Yesterday the Korean peninsula put a bid in Gold just as it put a bid in Green back and Yen and we had no option but to term Gold as safe haven almost of the caliber of a Reserve instrument. Why, we are interested is to find out whether Gold is better than even a reserve instrument! It enjoyed a perfect rally yesterday but as we expect weakness in Green back today would it then switch sides and conform to inverse correlation as commodities move opposite to Green back.

Gold gave a very vital break of Kijun line yesterday and traded upward as was expected after the break however; the strength that gold is showing above the break region as it has not visited the break point may seem significant. This is one side of the story however the other side of the coin shows that Gold has not be able to break the high posted yesterday either and thus has been confined to a very narrow trading range since yesterday. Some might confuse this as a consolidation in a mid move but recently such apparent consolidations seem to give a wrong price break out, opposite of what is expected of them. This then seems to be the case with Gold, Gold to us wouldn’t test the break point of Kijun line but however just shatter it to trade lower and find support around $1,362s.

They Say When you don’t Fall on Bearish News, you’re not Bearish: This certainly then holds true for Crude [At least for NOW] who we have found to be on bid ever since the Saudi King flew to U.S for medical attention however, the most bearish of the news yesterday for Crude was in form of API figures

As crude oil inventories rose by a whopping 5.2 million barrel which was far above the consensus of the street. The distillate and gasoline inventories were down but again not close to streets guesstimates as the street had expected them t be down by 1.5 million each whereas the former was down 0.3 and latter by 0.5 million.

Today, however we get DOE numbers and the street’s consensus is negative for all three figures however, keeping in view the API figures released yesterday we’d not be surprised to positive inventories. Crude has thus far been fortunate in steering clear of the chaotic waters however, the DOE’s might very well be the thorn which rips Crude of its good fortune as it trades low $82 per barrel as we write. A break below $81.65s [now] would very much mean new lows lie ahead and the recent lows would offer no support as Crude moves toward $76s

The Mixed Equities: In last 10 days the high for Dow has been 11,275 and low just around 11,000 [index numbers are rounded off] and since Tuesday of last week the high 11,200 has not been broken nor the market has managed to break the bottom. 11,200 now looks like a “neckline” which if breached may push Dow upward by at least 200 points perhaps in a similar fashion as how it has been trading since Tuesday of last week with triple digits swings on either side. U.S equities to us seem to be moving like a rudderless ship which is being tossed about by the waves which in this case the ever changing news. The labor department jobless claims which should have put a bid on U.S Dollar have absolutely done nothing and instead have put a bid on everything including the U.S Equities.

The equity markets then to us are illogical and as we have stated numerous times before markets can stay illogical far longer than our pockets can remain solvent thus we with our corrective phase would continue to be on the side lines unless a decisive break above the neckline in given. One day’s optimism transforms into next day’s pessimism this is surely not a place for the faint of hearts. We advice caution then!

By Bari Baig

© 2010 Copyright Bari Baig - All Rights Reserved
Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

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