Gold and Oil higher while stocks plunge on Syrian tensions

August 28, 2013

Recap

  • The uncertainty around the Pandora’s Box that a Syrian attack might open drove markets overnight as the US, UK and France signal that they are ready to make the perpetrators of the recent gas attack in Syria pay. Markets have reacted by running into safe havens such as Yen, Swissie and Gold and Oil has shot through the roof with Brent up above $130 Bbl and Nymex at $109 Bbl.
  • The rhetoric from US Secretary of State John Kerry was quite Bellicose and Defence Secretary Chuck Nagle said the DoD is ready to act on the President’s order – so it seems a case of when, not if, a targeted attack on the Assad regime occurs.
  • Stocks didn’t like this one bit in the US or Europe with falls from the get go. The FTSE was a relative safe haven falling only 0.79% but its Continental cousins were hammered lower with the DAX off 2.28%, the CAC off 2.41%, the Milanese exchange down 2.34% while stocks in Madrid fell 2.96%. Ugly very ugly, but the US fared a little better with Dow only falling 170 points or 1.14% while the Nasdaq was more circumspect dropping 2.15%. On teh S&P 500 it was a fall of 27 points and an approach toward very important trendline support (see below) for a drop of 1.62%.
  • In overnight futures trade the SPI futures here at home have been smasjhed lower and after opening around 5120 last night the last trade this morning as I write was at 5064 – so stocks are likely to be pressured again today.
  • Rates are always a safe haven at times of trouble too and last night was no different with the US 10 year rallying 8 points to 2.71% even though the Richmond Fed Manufacturing Index fairly rocketed from -11 last to +14 this month. In the Uk Gilts were down 11 points to 2.60% and German Bunds fell 8 points to 1.85%.
  • On FX markets it was an interesting past 12 – 15 hours. The Aussie was hammered in late Asian trade but found solid support around 0.8930 and is back at 0.8985 this morning. EUR (1.3391) is going ok because German IFO printed better on all three measures of Current, Climate and Expectations. GBP (1.5543) benefited along with Euro but it is the Yen (97.04) which was the big winner gaining 1.50% roughly on the USD over the past 24 hours.
  • On commodities as discussed Gold and Oil surged but Dr Copper didn’t manage to rally or sell off which is interesting, very interesting. Silver rose 1.16% and our friends the Ags can’t contain their enthusiasm for volatility with corn down 3.05%, wheat off 0.61% and Soybeans down 0.96%.

On the data front today BoK Manufacturing in Korea, Construction work in Australia and Gfk Consumer Confidence in Germany before Italian Retail sales, BoE Governor Carney address the British Parliament and we get Pending Home sales in the US.

Oh and by the way I have no way of knowing if this idea has any legs but with tomorrow the 50th Anniversary of Martin Luther King’s I have a dream speech I don’t expect a rocket attack to distract from what is an important and historic anniversary for the United States. So we may have to wait till week’s end before we get more details. Which means an extended period of tension in markets.

S&P approaches support

Even without the volatility induced by the potential missile attack by the West on Syria and the confrontation could this cause with Russia and China the Stock market“looked like it is rolling over” as I noted in Macro Musings our Free Weekly newsletter on Saturday and which has been released for non-subscribers today.

The key level in this big uptrend from October last year is 1619 in S&P 500 terms and a break of that would be decisive.

But this trend line has had the requisite 3 touches to render it worthy of buying in front of and we respect it unless or until it breaks. If, when, it does target 1550/60.

Gold’s rally continues

It is truly difficult to see how I got caught short gold when you look at the chart below and you take into account that I called it higher to $1413 a month or so ago. A truly stupid idiotic trade which is a warning to me and others not to mix up your time frames. As I said yesterday I was mucking around in gold to better understand the market – with real money – and I have a good handle on things now and will be trading it more often. But gee whizz – why not long?

Anyway as you can see Gold is approaching the top of the uptrend, near the top of the Bolly Bands and the MACD histogram is getting elevated – this is not a signal to sell per se but it is a signal that Gold may be running into resistance. You add the fact that $1413 is the big 38.2% resistance of the big 2012-2013 down move and a few dollars either side is important resistance.

The top of the Gold trend channel is $1430 today so there is a chance it could head to there before a decent retracement. JimmyR is bullish though so selling is tactical at the moment, if at all.

Have a great day and good hunting

Greg

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