Holiday Week Trading Begins

As this holiday week begins, we find that both safe haven and risk-on assets are in play. As of 3 o’clock EST, we have both the precious metals complex and US equities posting substantial gains on the day.

US Equities Post Solid Gains, NASDAQ on Pace for New Record High.

US equities, vis-à-vis the Dow Jones, is trading up approximately 24 points at 19,958. Although that is not a new record high, this solid gain moves the needle closer to a 20,000 Dow. Still, the Dow is lagging behind both the S&P 500 and the NASDAQ in terms of daily percentage gains. The Standard & Poor’s 500 is trading up over 3/10 of a percent at 2271. Most impressive is the NASDAQ index, which is trading up almost 6/10 of a percent and is on pace to close at a new record high. As of this writing, the NASDAQ 100 E-mini is at 4971. If the NASDAQ closes here or higher, it will in fact close at a new historical all-time high.

Safe Haven Assets in Play

The entire precious metals complex is trading higher on the day. Platinum is providing the greatest percentage gain, trading up roughly 3% on the day. Silver is also performing quite well with the net gain of over 1 ½%, and currently trading at 1601 (most active Comex futures), and 15.94 cash.

Gold is trading moderately higher, currently posting a gain of $6.50, at 1140 per ounce. The question precious metals traders must ask is whether or not recent downside pressure has subsided, and whether or not we have seen a base or support form at recent lows.

Truth or Potential Trap

Truth: There is no doubt that the current equities rally is not only in play but continues to move equity prices higher. This is partially based on what is being termed the, “Trump Bump”. This is the current level of optimism based upon the belief that President-elect Donald Trump will bring a fresh start or, “reboot” to Washington’s politics as we know it.

The other undeniable truth is that the US economy is strong and growing at a moderate pace. By virtue of the interest rate hike, which was implemented earlier this month, the Federal Reserve is sending a clear-cut message that they have confidence in the US economy.

Potential Trap: The fact is that traders and investors are placing optimism on President-elect Trump lowering taxes and cutting regulations, which is, in essence, creating a more favorable business environment. But this is untested, with unknown results. We will have to wait till after the presidential inauguration on January 21, before we have any clearer indication as to whether or not President Trump is able to take these policy ideas and actually implement them. Until then, it is quite likely that we will see continued moderate growth in equities.

Although it is too early to tell, recent activity in the precious metals markets alludes to a real possibility that support levels have been reached. Of course, we would need to see real follow-through from today’s upside move in both gold and silver.

Wishing you as always, good trading,