Gold finished the day flat

Clint Sorenson, CFA, CMT WealthShield

Highlights:

Market Recap: The S&P 500 finished down 0.28% for the day. The US 10 year Treasury yield dropped 4 basis points. The top performing factor was the low volatility factor and the strongest sector was the utilities sector. Gold finished the day flat.

Chart of the Day: Low volatility is bouncing against high beta. Defensive factors are winning.

Treasury Bonds: Long-term Treasury bonds have been moving up in a strong positive trend since breaking out of the top end of the range. What could bonds be telling us about the economy? Most likely Treasury bonds are telling us that the economy is slowing.

Gold: Gold has been consolidating above the 200 day moving average since breaking into a positive trend in the early part of 2019. The technical pattern is a triangle pattern, and it implies a potential continuation higher. However, a breakout above 1300 would be needed to confirm.

Copper: Dr. Copper is quickly approaching the support zone and has broken into a negative trend, closing 2.5% below the 200 day moving average. Dr. Copper is saying the global economy is sick and could signal further market volatility on a breakdown below the lows of 2018.

US Dollar: The US Dollar remains in a positive trend, although the price action has not been that strong to the upside, simply stable. Volatility has been rather muted in the US dollar.

Australian Dollar/Japanese Yen: The currency pair that has historically correlated strongly with risk aversion and return seeking behavior is flashing a great big warning sign. The negative trend in the currency pair is implying that further defensive posturing may be on the horizon in markets. That could potentially mean a rise in volatility.

Bitcoin: Despite the pullback from the important 8000 level, Bitcoin remains in a strong positive trend. It is currently holding above the 13 day exponential moving average.

Futures Summary:

News from Bloomberg:

The trade war may last until 2035, a top Chinese government researcher said, predicting a cycle of "fighting and talking." State mouthpiece The People's Daily called the U.S. the biggest troublemaker and said the goal of making America great again will only make it a laughing stock. Nomura said a tariff hike hitting almost all China's exports is its baseline scenario, with a 65% probability by year-end.

Southwest and American join airlines in Montreal today in a huddle with the IATA to discuss Boeing's 737 Max, though details are scant. At the same time, the FAA and other global regulators will meet in Texas to review steps needed to get the plane airborne again. The fix may be limited to a software update, while compensation for carriers may reach $1.4 billion, Bloomberg Intelligence said.

Earnings roundup: L Brands boosted the low end of its guidance on Bath & Body Works strength, which offset weakness at Victoria's Secret. NetApp's fourth-quarter results and outlook missed. Today, RBC and TD Bank will be in focus after CIBC missed yesterday. And food delivery competition from Alibaba will be watched in Meituan Dianping's earnings. HP Inc., Best Buy, Ross, Weibo and Sina are also due.

Theresa May is hanging on by a thread, with her Brexit deal and her Cabinet in tatters. European Parliament elections that the premier hoped the U.K. wouldn't have to hold kick off today, and her party is bracing for a drubbing. The results won't be known until after the rest of the EU votes, mainly on Sunday, so the endgame may play out Monday. Here's our guide to the elections and our choose your own adventure game.

U.S. stock-index futures slumped with European and Asian equities as investors sold off tech companies in anticipation of a prolonged trade war. The yen, gold and Treasuries gained. The euro and pound weakened. Industrial metals dropped, while oil extended losses on higher U.S. inventories.

Author

Clint Sorenson, CFA, CMT

WealthShield

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