US stock futures are up slightly on Europe’s lead as traders wait for this morning's US employment report. A good number will add to the positive sentiment of improving European manufacturing activity, the Fed’s policy statement, Europe’s long-term repo operation and progress on Greek debt.
Two days ago when interviewed on CNBC, CPM Group's metals analyst Jeffrey Christian opined that Gold had reached a cyclical peak that day or perhaps the following day, and that prices would trend lower for the rest of the year. He cited excessive production, excessive sales of jewelry for cash, and lack of investment demand. While I respect the CPM service and its publications, I must note that he too often has made the same call only to be embarrassed as Gold reached much higher levels.
Green, green everywhere. Markets rallied overnight on positive news from China and were then supported by more good news from the euro-zone.
Manufacturing activity rose in China, France, Germany and the UK. We need to watch the US ISM Manufacturing Index (being released this morning), because a good number will do a lot towards easing worries about the economy caused by the recent drop in the Baltic Dry Index – something that we have been writing and wondering about here.
Green light on trading today. The European bourses are all trading up over +1%. The bankers, miners & oilers and consumer stocks are all strong. The US Dollar and treasury bonds are soft.
Bill mentioned in the WIR that certain large stocks were not performing well last week and that was cause for concern for the bulls.
Traders are happy with the Fed, but not sure about the situation in the Euro-zone which will take some time to fix so bad news could pop up from overseas at any time.
Risk management should be taking place now if you have gains, imo.
[4:22pm ET] It was a strange week in that the NASDAQ was very strong, but the Dow 30 was weak. There were 7 rising sectors and 3 that fell. But that result didn’t measure up to the Dow 30 since 20 of the 30 were down.
European banks are weak this morning, so I'm not looking to chase stocks higher here.
The question of the day seems to be whether or not Gold (GLD) can hang on its recent gains. My answer is (i) the Fed policy of keeping interest rates so low that in relation to inflation they will be negative, until 2015 maybe, is good reason to buy Gold, and (ii) as long as the Indian Rupee (INR) is lifting, then capital is flowing into India and the upper class there have more resources to buy Gold.
The Euro is strong this morning as European banks and other traders believe that a deal to resolve the Greek sovereign debt crisis is imminent.
A weak US Dollar is lifting the prices of equities, commodities and precious metals. In European markets, the (i) Banks, (ii) Miners & Oilers and (iii) Consumer stocks are mostly in the green.
Yesterday, we saw a few cracks in both the stock and gold markets. As you know, we have been long but cautious for a week or so. When the market “should” take a breather but doesn’t, it often pops higher as it squeezes shorts out of their positions. Today’s Fed meeting could be the catalyst for future direction so today may be rather slow until then.
