Market sentiment continues to oscillate in regard to U.S. equities as traders continue to witness large price swings in both directions. Gone are the days when a 100- or 200-point gain or decline in the Dow Jones Industrial Average would be considered a sizable move.
It seems there is a new normal. That normal is characterized by swings in the Dow in excess of 500 points or more in terms of the daily range, and net changes on the day, where a 300-point gain or loss is considered normal.
In regard to market sentiment, the extreme oscillation ranges from strong risk-on sentiment moving equities higher to strong liquidation based upon fears and concerns that the robust and strong economic growth that currently exists will diminish as the trade war ramps up, which is slowing economic growth to a standstill.
The net result has been massive selling pressure followed by strong and robust gains due to a return to the accumulation of equities.
The Dow hit an all-time record high on October 2 when this index reached a high of 26,930. On Monday, October 29, the Dow Jones had dropped to a low of 24,100 points. In just under a month, we have seen this index lose almost 3,000 points. Over the last two trading days, we have seen the Dow move from the lows of 24,100 back above 25,000, representing a price gain of about one thousand points in today's trading.
In other words, the new normal is much too erratic to be considered normal.
Gold pricing today has come under pressure and closed moderately lower for the third day in a row. After hitting an intraday high of $1,246 per ounce, gold prices have slowly eroded and are currently fixed at $1,217.00 after factoring in today’s $8.30 decline.
The most significant factor of today’s price decline is that pricing has now fallen back below the 100-day moving average and the 0.618% retracement area which collectively formed a price band of former technical support. Because current pricing is just below the 0.618% retracement, it seems that the 100-day moving average will once again become technical resistance, and the 50-day moving average will once again be the price point that technicians look at as a key support level.
The upcoming meeting between the leaders of both the United States and China in November will be critically important and will determine whether we will see robust and economic growth continue, or a trade war which threatens to derail economic growth in China and the United States. If the two leaders are unable to move the needle closer as an acceptable and peaceful conclusion of the current trade war, the repercussions would be felt globally.
Wishing you as always, good trading,