Gold And Equities Are Trying To Get The Feeling Again

U.S. equities dodged the bullets that shot down European indexes and the Nikkei today. The latter was down not quite 5.5% on the session.

That stocks in New York are either mildly up (the Dow and S&P 500) or barely down (NASDAQ) speaks loudly to the struggle against crude oil price worries. Perhaps the markets are finally saying, “Enough already, all the gloom and doom is overdone.”

Even some energy stocks have remained strong, especially on the dividend end, such as Exxon. Our sense is that everyone in the market is going to get a turn being taken out to the woodshed. Obviously oil is taking an extended tour. It settled in mid afternoon below $28 but has since recovered.

The sectors that either are or about to take their whipping are tech – NASDAQ has been bouncing all over the place – and banking. Witness what happened on the Nikkei today. The Japanese export sector was also weak with companies such as Toyota, Nissan, Honda and Sony off between 6% and 7%. Two of Japan’s largest banks fell 9% in trading.

The rising yen hurt both Japanese export businesses and banks. Bond yields around zero naturally hurt the banks, too.

U.S. 10-year bond yields also fell, indicating that demand is high for bonds as a haven play.

Gold backed off its gains from yesterday and late last week. Profit takers certainly have stepped in because conditions did not change in the last 24 hours. Although it is hard to confirm, perhaps some traders are worried that Janet Yellen will have something to say that they will not like tomorrow. Yet gold remains close to its 7-month highs.

The best that Yellen can say is that the slowdown is real, and it will have to be both dealt with and weathered. How, though?

Watchers of the U.S. Congress see no way that body will commit to new taxes that will be dedicated to huge infrastructure projects, specifically in transportation.

Its members have yet to learn that monetary policy cannot pull the whole load.

Meanwhile, the CBOE Volatility Index (VIX), considered generally to be the best gauge of fear in markets, traded near 26.0 after opening above 28.0. Early in February it stood at around 20.0, so indeed volatility has been rising in the last week or so.

The dollar fell 0.6% against a basket of currencies. That’s good for the U.S. economy, but not great for other big economies. It is terrible for developing economies.

Wishing you as always, good trading,