Every Other Day

Today, oil took another licking and gold came along for the ride. The dollar was up strongly once more, except against the British pound. Contradicting the usual expectations, U.S. equities were down, although that might be expected as those who are ready to book their losses do so before the bell tolls on 2014.

The pattern for gold in the last dozen trading sessions is well established now. Up toward resistance one day, then down to support the next. Oh yes, the cycle may take an extra day once in a while, but, the pattern is unmistakable.

As we said, oil is still taking a beating, down more than 2% today. It’s a bloodbath. We’re now approaching a shakeout price level, which is between $45 and $50 a barrel. Right around that level, high-cost producers bail on keeping their supplies flowing. Naturally, that will drive the price back up unless the Saudis or Venezuelans step in and produce more. That, however, is unlikely to happen because their refining capacity has been reached already.

Peeking over the horizon for 2015, what are the major fundamental issues to keep an eye one? Here are a few bullets:

–      We will discover just how dovish the new FOMC is. One man’s meat is another man’s poison. We are sure to hear increased chatter from the sidelines as more hawks are bumped off voting status in the new session and will undoubtedly give public vent to their fear and loathing of low interest rates.

–      We will discover just how strong the U.S. recovery is and how the single biggest unified economic force on the planet can help other regions grow or sustain current growth. A man’s got to know his limits.

–      We will find out if plummeting oil prices are actually good for the world economy. Seems so, but the road to hell is paved with good intentions.

–      Finally, we will find out whether the era of thinking of gold as “money” – stable money – has actually ended. As fear of the future declines, so does the price of gold. Or, will the yellow precious metal be like the attendees of Woodstock and be able to sing, “We are stardust, we are golden”?

Wishing you as always, good trading and here’s to a happy and prosperous 2015!