Up, Up and Away

In 1967 the group 5^th Dimension asked “Would you like to ride in my beautiful balloon?” in their song Up, Up and Away.

Reminiscent of those days, the US equities markets I believe are asking the same question to investors. “Would you like to ride in my beautiful balloon?”

Investors seem to be responding with an overwhelming yes humming “for we can fly, we can fly”.

After weathering a sizable correction in both the Dow Jones industrial average as well as the NASDAQ, the water seems to be safe, as many investors are reentering.

The net result: the Dow is currently trading up 200 points and the NASDAQ composite is trading up about 100 points on the day.  What may be more impressive is that this is the fourth consecutive day that both the S&P 500 and the NASDAQ have extended their gains.

As counterintuitive as this may seem but running in tandem with the higher equities markets is gold, which is now trading at a six week high.

Whether you attribute gold’s recent gains to bargain-hunting, technical buying or safe haven demand, we certainly cannot attribute these recent gains to a weakening equities markets. Of course the final piece to the puzzle is the US dollar which continues to run strong.

It will be interesting to see whether or not the US equities markets and gold can continue to run in tandem to higher prices. No doubt this would be a dramatic disconnect from the recent negative correlation we have noted between stock and gold prices.

At least for now it seems as though investors in both stocks and gold seem to believe “the world’s a nicer place in my beautiful balloon”.

Wishing you as always, good trading,