The Cohn Plunge

A monkey wrench was just thrown at the financial markets and we can see all stocks around the world reacting to the news. The resignation of Gary Cohn from Donald Trump's administration is a game changer.

The former investment banker was seen by many on Wall Street to be the last adult in the White House. Cohn joins a long list of high profile dropouts from the Trump Administration.

After battling with the President over the planned Aluminum and Steel tariffs, Cohn finally threw in the towel, a few hours after Trump tweeted that "there is no Chaos, only great Energy."

Fortunately, from a markets perspective, Gary made the announcement during the downtime when most markets are closed.

For investors, more than the loss of a level-headed banking figure in a much-needed position is the gripping realization that the proposed tariffs are not only a possibility but likely to happen.

Traditional Markets

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Market

Trump's idea to impose the metal tariffs caused stocks to tumble from Wednesday to Friday (see the yellow box in the graph below). There was a slight recovery on Monday and Tuesday was going fine until Cohn resigned.

Still, put in the wider context even though the Cohn plunge (purple circle) affected many different markets the size of the drop is still small compared to the big sell-off in early February (blue box).

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DJ30 Chart

Normally, we would look at an asset like gold to try and gauge if investors are seeking risk or safety, but lately, that's been out of the question.

This is partially due to the power of the range. (begin segway...

We can see the power of the range being demonstrated at the moment in Silver.

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Silver Chart

Notice how for most of last year the price has remained between $15.50 and $18 per ounce. For traders, this is an excellent opportunity because a well-defined range makes it easy to buy low and sell high.

By placing your stop loss outside the range where it is unlikely to get triggered and your take profit at the center of the range, you vastly increase the chances of making a profitable trade.

...end segway)

For gold, things are a bit more tricky right now. The channel (yellow) has been rising steadily since early 2017 and now we're near the top.

Even if the sentiment is looking for a safe place to store value or even if investors are looking for a hedge against inflation, it's difficult to place an entry near the top of the channel.

This is why so far this year, gold has been creating a new mini-range (blue box below) near the top of its long-term channel.

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Gold Chart

What else?

Also in the headlines are the upcoming meetings between the leaders of North & South Korea, and Saudi Crown Prince Mohamed Bin Salman's visit to the UK.

Both meetings are expected to make some headlines but neither is likely to move the markets unless there are groundbreaking results.

Also, some central bank action could come into focus with interest rate decisions coming up from the Bank of Canada this afternoon and the European Central Bank tomorrow.