For roughly a year and a half to describe market conditions, I've borrowed and used a concept from two classic TV shows. The Twilight Zone's Terror at 20,000 Feet and The Simpson's Terror at 5 ½ Feet. Both episodes depict a lonely passenger who looks out the window and sees a gremlin that nobody else can see.
As recently as last Thursday and after we all went paragliding, we watched the Dow nearly launch to 18,000. Many came up with viable theories why gremlins in the market continue to exist.
And then last Friday, with the help of a much better than expected unemployment number along with an increase in wages, up in the air our paraglider went. The Dow soared past 18,000 with nary a gremlin in sight.
So after 8 attempts to rise above 18k in 2016, turns out the 9th time's a charm. Therefore, as the market ends the week cruising at altitude, we wonder:
Surprising to many looking for a bottom, the 20+ Year Long Treasury Bonds continued to fall. The TLTs closed the week on new all-time highs.
The US dollar barely budged with the 50 week moving average just slightly overhead. The Euro sits in a Distribution Phase.
Even more surprising to lots of folks, the metals also substantially rallied last week. Crazy, right? The theory that gold, miners and silver must go down because of what exactly? No more fear? Lower Oil prices? Deflation on the rise? The DJIA is up?
Please, take those theories based on historical relationships and throw them in the trash bin. Hit delete once and for all.
Here's my theory: the metals are rising partly because the Federal Reserve is so dovish. If they aren't convinced that the economy both in the US and abroad aren't healthy enough to raise the interest rates, then doesn't it make sense to hold onto metals? Besides, while the stock market lives in a fantasy world, for so many others reality has a different sting. Hence, our recent and increasing turbulent times.
