Recovery And Reflection As We Acknowledge The World Grows Smaller

Today was a day of recovery for markets as well it was a day of recovery from pondering the awful events in Paris this past Friday.

While we have much political and military business to take care of, it was good to see a little optimism on the stage. There were a couple of important factors driving the uptick of prices in equities, crude and the U.S. dollar.

Gold, though, fell $1.30 an ounce (in the face of the uptick in everything else). Dollar strength accounted for all of the loss in gold prices even though in regular trading, investors were bidding it up.

Platinum and palladium finally saw strong trading to the up side.

Consumer sentiment in the United States turned more positive in a report issued today. It stood at 93.1 on the University of Michigan/Reuters poll of how consumers feel personally and how they feel on national consumer issues.

The 93.1 is the best we’ve seen since July and we are not too far away from the pre-recession highs achieved in 2004, or 95.3 on the index.

The biggest boost to American stocks, however, was the spectacular bump up in prices of West Texas Intermediate crude, which at 4 PM in New York has gone higher by 3.35%. Brent North Sea was also up but it showed less bravado in its movement. Quieting down somewhat were fears that geopolitical tensions could threaten global oil supplies.

Even though fear is understandable, in a world where oil supply is more diverse than it has been ever, thinking that the attacks on Paris would hurt prices for any length of time seems ludicrous, at best.

This does not mean that oil prices will not be sensitive to events created by ISIL in the war zone or in Europe. War is always problematic for trade and for optimism.

On a more purely economic basis, China has been contracting this year and it is now generally accepted that Japan is in recession. Japan’s Cabinet Office announced Monday that GDP fell at an annualized rate of 0.8% in the July-September quarter, and shrank at a seasonally adjusted 0.2% from the three months ending in June.

A recession is usually defined as two consecutive quarters of contraction. However, some experts are predicting that Japan will turn around in the fourth quarter.

We also need to be aware of U.S. dollar strength and how it is going to affect the U.S. economy. We’re going to take it as an accomplished fact that the Fed is going to raise rates and that will keep pushing the greenback higher as other countries, attempting to keep their economies stimulated through low interest rates, quantitative easing and the like.

Today, the dollar is up 0.85% on the strong possibility of a Fed interest rate hike in the near future as well as being up on traders seeing the dollar is a safe haven given the aftermath of the Paris murders of civilians.

Bond yields fell on U.S. issues as face prices rose smartly. This is no wonder, of course, given that bonds have been serving as one of the many safe havens people sought since terrorists.

Wishing you as always, good trading,