A better night for risk as stocks and the Aussie rise but gold got smacked

January 31, 2014

I’m not sure if its the end of the month or markets a genuinely more sanguine this morning but it was a better night for markets with the US GDP data’s print around expectations driving stocks and the US dollar higher . The Aussie rallied alos but gold was belted lower as weak longs exited.

Turning quickly to the data the preliminary US Q4 GDP printed 1.3% for Q4 which is pretty good all things considered and personal consumption during the quarter rose 0.7%. Both data suggest the economy has entered 2014 with genuine momentum but the big 8.7% fall in pending home sales last month – even taking the weather into account – and the increase in initial jobless claims to 348,000 is a cause for concern.

So at the close the Dow is up 125 points or 0.80% at 15,864. the Nasdaq is 80 points higher for a gain of 1.96% with Facebook leading the charge with a 14% rally. The S&P 500 is up 1.23% or 22 points to 1,796.

Clearly we aren’t the only ones watching this trendline in the S&P 500

The S&P has pulled back but not crashed through trendline support yet which shows just how many traders must be watching this same chart we are. This reinforces out view that if 1760 gives way in futures terms things could get ugly.

But the line has to break first but as a subtle warning my JimmyR indicator has turned bearish for the first time in months.

Except for the FTSE which fell 0.10% stocks in Europe were also higher on the continent with the DAX up 0.39%, the CAC 0.55% higher while stocks in Milan and Madrid up 0.39% and 0.70% respectively.

Locally futures trade on the ASX shows the SPI 200 is up 20 points to 5158 bid. But better stock performance has taken some of the safe haven bid out of global bonds so the 3 and 10 year bond contracts have fall 6 and 4 points respectively to 97.09 (2.91%) and 96.02(3.98%) respectively.

On FX markets the US dollar was stronger which pushed the Euro and Pound lower. The Euro lost 0.8% to 1.3552 while Sterling lost 0.49% to 1.6479. Reflecting these moves USDJPY is up 0.39% to 102.68 while the Aussie dollar is also up around half a percent to 0.8781.

On commodity markets gold is clearly trading as a risk on/off switch losing 1.49% at the close but it mad a low around $1236 before bouncing back to $1243 oz this morning.

More frustration for the gold bulls overnight with a break back below the line again and toward uptrend support.

I had a bid in at $1255.35 overnight and while I thought I’d get filled on a down draft I didn’t expect it would fall as far as it did. We have to respect the trendline but if $1233 gives way it could get ugly.

Crude is up 0.75% to $98.09 but copper lost another cent to $3.24 lb. Corn rose 1.40%, Wheat is up 0.36% and Soybeans rose 0.45%.

On the data front the Chinese New Year leaves that market out for the day and Korea and Hong Kong are also out but in Japan there is a raft of CPI data along with industrial production, unemployment, vehicle production, housing and construction.

Today in Australia we see private sector credit while tonight in Germany retail sales are to be released along with EU CPI. In the US Chicago PMI, personal spending and consumption are out.

Have a great day and good hunting

Greg

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