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Dow Breaks 20,000 – Precious Metals Tumble

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Maybe not as historic as breaking the sound barrier, today the Dow Jones Industrial Average broke above 20,000. With an hour and a half left in the trading day, the Dow Jones is trading at 20075.64, up 163 points for the day. Gaining almost a full percentage today, the Dow Jones average broke through 20,000 like a hot knife through butter, triggering multiple buy orders and moving the average well above that milestone number.

The Trump Rally Continues

To say that the totality of the current equities rally is completely based upon this new administration, which took office under one week ago, would be a misnomer. This is because an equities rally was firmly in place prior to the presidential election. Therefore this Trump rally should be viewed as a second leg of the rally, which began at the start of 2016, with the Dow trading at roughly 15,000. For the majority of 2016, prior to the presidential election, US equities were gaining value and moving to higher ground. Just prior to the presidential election the Dow was sitting at approximately 18,000.

However, within hours of the presidential election results, the existing equities rally ramped up in an accelerated manner, and gained over 2000 points in under three months. It is this acceleration that can correctly be termed the Trump rally. Nonetheless, today will hold a strategic place in history with the Dow Jones Industrial Average breaking 20,000. All major average is trading to new record highs.

Precious Metals Tumble

This risk on environment certainly had a detrimental effect on safe haven assets such as gold and silver. The net result was gold losing roughly a full percentage of value, and silver losing roughly 1 ¼% in value. On a technical basis, today’s lower gold prices could be indicating that the most recent rally in the precious metals, at least for now, has concluded.

Our current technical studies indicate that the next level of support in gold falls roughly at 1183. That number is a 38% retracement from the recent rally in which gold prices moved from 1123 to 1223. If the 38% retracement level at 1183 does not hold, the next support area would be 1161, which is a 61.8% retracement of the last rally.

The fact of the matter is that the fundamentals moving the financial markets are absolutely a moving target as this new administration begins to implement policies. The net outcome is still uncertain. However, true to his word, President Donald Trump is quickly acting upon his pledges and promises made during the presidential campaign.

Wishing you as always, good trading,

Gary S. Wagner - Executive Producer