No real up move in equities into the new moon / end of lunar positive period, but US indices have potentially carved out a rounded bottom the last couple of weeks.
The Nikkei still remains unresolved, having broken up out of the smaller wedge but been contained in the larger triangle:
Commodities pulled back overall, particularly precious metals, as the US dollar mustered a rally. Gold and silver were at some point going to take a break after a 20%+ rise off the lows, so it’s what happens next that’s important.
Source: Trader Dan
My target on gold and silver remains a retest of the breakdown – on gold this would be the 1450-1550 area. I would then take half profits. So, I am looking for gold to make a higher low and continue the uptrend in due course.
The US dollar is at an important juncture. A breakdown would fit with a commodities rally. A break-up could be enabled by tapering.
Source: Chris Kimble
Syria action and Sep 18 FOMC expectations are going to remain in play next week.
Regarding prospects for September tapering, the economic data has been overall good. Here the latest ISM composite for the US.
Global composite manufacturing and service PMIs also came in overall very healthy this last month.
Although there remains the divergence between developed and emerging economies.
A stronger US economy and increased expectations for tapering have continued to push up treasury yields, with the next chart showing the possible eventual target of 3.5-4% yields:
Russell Napier’s stock market history work states that cyclical bulls have typically ended with the over tightening of yields together with excessive inflation. Yields may still be low by historic norms, but they have doubled from the lows in the last 4 months and we should not expect historically normal higher yields in the current environment of high debt and negative demographics. So, this doubling has been bad for the housing sector and other interest-sensitive groups. Excessive inflation has not yet materialised, and the fortunes of oil are key to this. It still looks technically strong and has the 2011 highs within its reaches, so that missing problematic inflation may arrive.
The key is “excessive” inflation and “overtightening” of yields, i.e. it has to be set against the economy. A strengthening economy can cope with higher yields and higher inflation, but not if it starts to weaken or if the latter two rise too far too fast. Moneymovesmarkets still see evidence in global narrow money for a turn down economically by the end of the year. This may provide the window over the next couple of months for commodities to gain momentum, we shall see.
Playing in to that is the solar cycle. Here is the latest NASA forecast, and they are sticking with a summer peak. For a higher smoothed max we would need to see a rapid uplift in sunspots now, but that depends if their forecast is more accurate than SIDC’s, so let’s see.