Not Yet Time For Champagne Just Yet But Break Out Some Sparkling Water

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The Bank Of Japan’s sudden move into negative interest-rate territory seems to have taken the entire world financial realm by surprise. (We also applaud how they were able to keep it under wraps right up to the announcement.)

It certainly proved incredibly salutary for equities markets around the globe.

Shanghai, in particular, found the upward energy it had been missing for what seems like weeks now, barely beating out the Nikkei on the day. Shanghai was up 3.00%, while Tokyo was up 2.80%.

In mid afternoon, U.S. stock indexes all were up – the Dow and S&P 500 by 1.90% while NASDAQ was just a bit behind them.

U.S. equities were helped by the continuing strength in crude prices, which, thankfully are beginning to stabilize. Perhaps crude is not heading to really solid ground just yet, (meaning $50+ per barrel), but the fact that it no longer is in free fall is significant.

The spread between Brent North Sea oil and West Texas Intermediate has widened again as the twins move back up in price. Nevertheless, many of the factors that have affected oil for the last 18 months have not evaporated and should not be ignored when considering black gold’s near and mid-term future. We have enumerated those many times in the last few weeks.

Speaking of gold… the yellow precious metal is finishing up its strongest month in a year. And although there is some safe-haven demand, our feeling, as we have said throughout this week, (and month), is that it appears there is a real recalibration and attendant renewed appreciation of gold as a good investment.

The shorthand for that thought is that gold has been oversold for so long that it should go up to the mid 1140s to 1150s. After that… well, fundamentals are always changing. Stay tuned and watch the technical analysis closely.

The U.S. dollar was up against the major trading currencies, understandably gaining almost 2.00% on the yen. The buck was up almost 1.00% again the euro. Ditto for the Swiss franc. The British pound fared a little better but was still pushed down by the greenback by about 0.80%.

Interestingly, we have been looking at a falling VIX (volatility index) since it peaked on January 20th. It is now at 20.55, a dramatic decline. That has taken us out of the so-called red zone that warns of an imminent recession.

What should we be feeling as the last week of the first month comes to a close?

We may be cup-half-full folks fundamentally, but we think after what appears to have been a disaster in the making, there is room for a reasonable amount of optimism.

Nevertheless, don’t pop the champagne cork just yet.

Wishing you as always, good trading,

Gary S. Wagner - Executive Producer