Cautious Stock Market Investors

U.S markets will be closed today in observance of the Martin Luther King Jr holiday. Some markets will be open like futures, but I will stay away from the market today because of the lack of volume and liquidity.

I will follow oil and gold prices and all the commodity traders should keep in mind that Crude Oil inventories will be released on Thursday at 11:00am, instead of the normal Wednesday 10:30 am release due to Monday`s holiday.

Gold is on the move and can go up about 25%, and the precious metal is the best performing asset class so far this year. It`s golden days for day traders. Take a look at the oil price. It`s like roller coaster, jumping up and down, and oil had the biggest gain in 2 1/2 years, ending the trading session of friday 5,82% higher.

The reason why the stock market didn`t follow the oil price on friday can be the disappointing retail sales report in early trading on friday. Retail sales dropped 0,9% vs a 2% forecast. The S&P ended Friday with a 27 point gain, and ended the week 25 points lower. That`s down 1,24% for the week.

The Dow saw triple digit profits on Friday with a 191 point gain, and it closed at 17511,57, wrapping up the week with a 226 point loss. Friday`s Preliminary Consumer Confidence report was a beacon of hope for the bulls. The report not only beat expectations. That`s the highest level in 11 years!

A number of questions marks seem to have investors leaning back on their heals this year. This is; plummeting oil prices, geopolitical turmoil and continued divergence between the world`s major economies like Japan, China, U.S and the Euro zone.

All the investors eyes are on the world`s central banks. The Davos meeting later on this week will be interesting, and the ECB is expected to deliver a stimulus package later this month. Investors will wait for definitive word from the ECB regarding its widely anticipated stimulus plan.

Bond market rose across the board as interest rates dropped lower, with the 10-year Treasury rate falling below 2%. The downtrend in rates is not good, and is a symptom of deflationary pressures which is worse than inflation. Plummeting energy prices are adding fuel to the fire.

The U.S dollar continued its bullish climb last week, putting downward pressure on the commodity sector as a whole. This trend can last awhile longer.

Investors are cautions and it seems everyone is a bit hesitant to commit to new, bullish positions until some questions are resolved. I will wait for a clearer trend to emerge and 1,200 in small-cap stocks need to break before I call the bullish trend in equities alive.

 

Disclaimer: The views expressed in this article are those of the author and may not reflect those of Shiny bull. The author has made every effort to ensure accuracy of information provided; however, neither Shiny bull nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in precious metal products, commodities, securities or other financial instruments. Shiny bull and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.

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Filed under Commodities, Quantitative Easing, Stock market

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