Bumpiness Ends The Week

The precious metals, especially gold, were no match for the dollar, which has been howling and screaming like an F-16 to higher highs, faster and faster.

The euro was down 1.25% against the greenback at €1.12 to $1.00. We could be approaching parity. This is good news for Europe, coming as it does before the spring and summer vacation travel periods. The currency shift should draw many, many more American tourists to the old countries.

The dollar also helped drive crude down yet again, this time around 1.85% for West Texas Intermediate. This does have a dark side for equities, though. The drop in oil almost perfectly reflected the decline in Exxon Mobil’s stock price today, off 1.86. Another big driver for the downward movement in equities’ share prices across all three U.S. exchanges was a disastrous decline in McDonald’s Q4 sales – minus 7.3%.

Interestingly, the yen again became a safe haven play, moving up against the U.S. dollar, contrary to every other major currency. You might not get a lot of bang for your contracts from the yen but the risk side is virtually non-existent.

All this week we have spoken in this section about volatility. Granted, the Dow moved up steadily and significantly this week, but it did so in fits and starts. Trading was not for the faint of heart. In fact, the Dow is now less than 300 points off its all-time high and around 2500 points up in the last 52 weeks.

That gold has persevered through such a rise, (even if it is off today on profit taking and weekend jitters), speaks to the high degree of interest in the yellow metal. We’d call this a split personality, both risk-on and risk-off moods in the market.

This is testimony to volatility. The big oil shake out is the prime culprit in the volatility. Europe’s move to quantitative easing should iron out some of the fears over that region’s performance. That leaves us with untrustworthy Chinese data on its activity, and Japan, which feels as if the whole country has simply retired except for the folks manning the robots at the factory and its lower-end service industries.

Now, with the U.S. thriving and Europe re-positioned, perhaps they can drag the rest of the developed and semi-developed world up with them to better economic growth. Low oil prices will continue to weigh on developing countries, especially those who count on oil revenues as part of their national governments’ streams. So that volatility won’t fade away very quickly.

Wishing you as always, good trading,