Weak Jobs Data, Stocks And Gold

Stocks gave up some of Monday‘s strong gains, but I find it little concerning in the sub-3,900 pre-breakout meandering. It‘s about time, and a play on the tech sector to participate meaningfully in the coming rally (or at least not to stand in the way again).

Talking obstacles, what about today‘s non-farm employment change, before the really key Fri‘s release? A bad number makes it less likely for market participants to bet on the Fed raising rates soon – but frankly, I don‘t understand where this hawkish sentiment is coming from, now when we‘re not at even talking taper. Raising rates in the current shape of the recovery, where we have commodities and financial asset prices rising, and that‘s about it?

No, the current economic recovery isn‘t strong enough to entertain that thought. The need for stimulus asap is obvious. Thus, prior trends in the commodities and currency arenas are likely to continue, and not even the current long-term Treasuries stabilization can prevent the greenback from falling more than temporarily.

Just as I wrote yesterday about stocks:

(…) All right, we‘re seeing a rebound in progress, on the way to new highs.

Gold scored modest gains yesterday, but these aren‘t enough to flip its short-term outlook bullish. Yes, it‘s sitting within the strong support zone (with another one over $40 further lower), and it isn‘t breaking down. It could actually stage a rebound precisely off this support zone next, as sharp rallies are born during the opposite sentiment clearly prevailing, which is what we have in gold now.

Silver remains relatively solid, and commodities aren‘t breaking down. We have a month historically strong for copper, and I talked both yesterday and Monday about what that means for the copper to oil ratio – and its relationship to gold, given the very accommodative monetary policy without real end in sight. This is then checked against nominal rates matching up against inflation, inflation expectations.

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Monica Kingsley 1 month ago Author's comment

Quick update:

Morning selling pressure appears abating, stocks returning above 3,850, HYG apparently refusing to decline more, and if XLK keeps above 130 today, we're still in that now again shallow correction that I talked before Feb 24.

Gold refused to decline below $1,700 - but needs to clear off the low $1,720s (yeah, that's another $10 today still to go if I am to like the short-term bullish turn). Still nothing to call home about in the metals. The dollar better tank again over the coming days... Gold and silver haven't yet lost the recovery momentum, and the $1,730s and above $26.50 are attainable still. The bull market in gold needs a rebound off strong support, otherwise it's becoming suspect.