I mentioned recently that my research on volatility suggested it could last into late January. Wall Street is certainly taking that option with another dramatic session. I had been thinking that we probably needed a bit more time before the Wall Street rolled over again. Perhaps this is what is happening as it trades in the range of the past week but I am just a bit concerned as the SPX gapped up at the end of last week and now has gapped down in the latest session . So still not a clear picture but I still think there might be one more little wave up. However, as usual I must point out that I still only see this as a rally in a bear market – yes it has been impressive but the swing to the upside is still only mirroring the huge swing we had to the downside over the previous three months.
Helped by a lower US dollar, gold has put in a stunning performance. I was worried at the end of last week that the sellers would “try” to push the price through recent support. However, it has passed that test with flying colours. This will be good news for our gold sector where we did see some heavy selling last week. However, as I have pointed out many times, I do have dramatically higher targets for gold but I repeat again, the path is not going to be easy. My last upside target on our gold index was exceeded when we had that flurry of buying at the beginning of the month. Now I am going to give my next target for this index – and just saying it quietly so not too many people hear – 7800. Shorter term – 6300. First of all however, we have to get through the resistance around 5800 and then it will probably need to have a pullback once it does break free. Obviously it is not going to get to these targets in a straight line and there will be times when we think it is going to completely fail and well it might but that is how I see it at the moment and have for the past year.
I mentioned the Chinese Yuan in relation to our metals recently. Since then I have done a lot of research on the Chinese currency and all the metals. But it is gold that really took my interest. Recently I asked in these notes why and what could make the price of gold go to the sort of levels I was suggesting. I have come to the conclusion it may well be all about the trend of the yuan which hit a new high for this year in overnight trading. Interesting to see that when the gold price moved at the end of last week, it broke out of a really nice pattern when the price is expressed in yuan. Just something more to keep in mind.
The disaster in Brazil pushed the iron ore price sharply higher overnight. As well the Brazilian stock market corrected sharply in line with Vale and amid criticisms of the system that allowed such disasters to happen.
With all the news after only two sessions, I am going to be really interested in how our market handles all the developments today.
(20min delay)
