Looking For A Reason To Believe In Equities

Gold and silver pulled back today in spite of dollar weakness, which took some of the sting out of an unexpected round of profit taking in regular trading.

What made the precious metals’ drop even more confounding was the rise in equities, which was nothing more than bargain hunting. The major indexes had fallen too quickly, even if you consider the selloff to be entirely justified.

Speaking of profit taking, crude oil hit a big pothole in the road to higher pricing after OPEC released data that showed it was close to recent output records. Brent North Sea was down about 3.00%.

Additionally, as part of that uptick in production, Iraq’s southern fields are pumping out more oil than they have in years. Russia is on the bandwagon, increasing its production and total barrels shipped in April.

Traders also cited a bearish stockpile rise of 821,969 barrels at the Cushing, Oklahoma delivery point for U.S. West Texas Intermediate crude. This is partially due to structural builds but the cyclical move is important. The summer gasoline blends are now well developed and demand for crude is down – for the moment. When school ends and vacation time begins, demand for crude to be distilled into gasoline will increase.

For the moment in crude, risk most definitely lies to the downside.

Equities are having an up, if choppy day in New York. Even Apple’s struggles are not pulling the NASDAQ down for the nonce.

The Dow and NASDAQ are up 0.66% and and 0.88%, respectively with the S&P 500 right in the middle of them, up 0.78%.

Europe was mixed but the Nikkei was down on poor Japanese exports as the galloping yen is beginning to have a deeper impact on Japan. (The yen, though, is down today, if weakly.) Toyota, Nissan and Honda were all trading off sharply.

The rise in the yield in the U.S. 10-year bond reflected the risk-on nature of today’s trading in New York.

This is more of a general sense, rather than something rooted deeply in data, but we are feeling that regarding U.S. stocks, investors and traders are looking hard for a reason to believe.

Sometimes when you look hard for something, you find something unexpected, like the warning signs of a recession. Slow world growth is a problem no matter how you slice it.

It is unreasonable to think the United States will always be the main engine of progress. So, while everyone is looking hard for reasons to believe, Europe is a good place to start. We need them to come alive.

Wishing you as always, good trading,