In the last few weeks gold has experienced a major breakdown, and, of course, there are many opinions as to what will happen next. Let's take a broad look at the technicals, so that we have some context for making decisions.
One of the concerns of late is the weakness in commodities and what that portends in terms of global growth going forward. Many argue that the slide in commodity prices is discounting a collapse in global growth in the near future.
According to our methodology, Wall Street is currently in ‘correction mode’ and additional near-term selling pressure cannot be ruled out. At this stage, nobody can predict the duration or depth of the ongoing stock market correction.
At a time when the Federal Reserve Bank has been debating how to end QE, recent developments in the economy have shown a deceleration in activity that has also transmitted into lower commodity prices. Stocks have been extended for some time, but have recently pulled back to support; while internally, many sectors have already exhibited sizeable corrections since February and March.
Any trader that’s worth his salt will tell you that he thinks differently about the markets than most. This is where he gets his edge against the competition. In other words, good traders tend to be contrarian thinkers.
With the financial experts claiming, some gleefully, that gold has "lost its safe haven status" in the aftermath of its biggest tumble in 30 years, many commentators thought (hoped?) that the dramatic price drop would steer people away from gold ownership.
As highlighted in a previous article, while the economy is on solid footing with little chance of a recession on the near horizon, there were some warning signs that we could be due for a soft patch in Q2.
Too Small to Fail
A ‘bail-in’ saved Cyprus. But dark days are ahead.
Under the bailout model, taxpayers implicitly promise to bail out bank creditors and depositors when things go south. Accordingly, banks are regulated by the government, in order to “protect” taxpayers.
We all know that markets don’t always reflect the health of the economy. It is not unusual to experience stellar market returns in an otherwise mediocre economic backdrop – something that investors are currently experiencing.
Financial history is marked with times when populations took collective leave of their senses and succumbed to delusions of ever-expanding wealth. Times of rampant speculation have been enthralled by the introduction of new technologies, that are used to justify pumping-up market valuations, - not just for the present, but also for the near future, and far over the horizon as well.
FS Newshour Q-Line
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