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After Friday’s Epic Trading Day, This Week’ Price Action Now Extra Critical For Many Markets

By Jim Wyckoff of Kitco News

Sunday June 26, 2016 12:27

(Kitco News) - The surprising vote last Thursday by U.K. citizens to leave the European Union sent shock waves throughout the world marketplace. Very few times are markets “wrong-footed” on fundamental news events, but the Brexit vote was a huge miscalculation by the general marketplace. Many markets on Friday experienced huge and even record daily price trading ranges. Gold futures saw a whopping daily trading range Friday of $110.00.

Now is an extra important timeframe for many markets. High volatility may continue this week. And by the end of this week, new price trends in many markets could be well established that will dictate price action into autumn, and even beyond.

Let’s take a look at some of the key markets most likely to see volatile price action this week, and their implications on other markets.

Gold: Once again the gold market has proven the “perma bears” wrong. Gold prices surged to a 27-month high Friday on the uncertainty surrounding the Brexit news and on the high volatility in other markets. A price uptrend on the weekly continuation chart for nearby gold futures has been established, to suggest more upside price action in the coming weeks.

History once gain repeats itself in the marketplace
Importantly, gold is one example of the powerful cyclical nature of raw commodity market prices. Earlier this year gold prices began to rally, along with crude oil and some other major raw commodity markets, for no clear-cut reason. What happened was that the major “bust cycle” in the raw commodity sector petered out and the beginnings of a new “boom cycle” were under way. A look at longer-term charts for most raw commodity markets shows the keen boom and bust cycles that those markets experience every few years.



U.S. Treasury Bonds: I wish I had a dollar for every time over the past 20 years that I’ve said the bond market bulls are resilient and that the trading landscape is littered with would-be top-pickers. I could probably buy a good meal for my wife and I. On Friday nearby U.S. T-Bond futures scored a new all-time modern historical high in prices. The weekly bond chart shows a big and bullish “outside week” up was scored, whereby the week’s high was higher and low was lower than the previous week’s trading range. If bond market bulls continue to march higher, there would be serious economic and financial implications. Such would suggest continued tepid world economic growth, or stagnation, a very low inflationary environment continuing, or even price deflation, and likely further stimulatory monetary policy moves by the world’s major central banks. None of the above is at all good. If indeed U.S. Treasury bond prices continue to climb in the coming months, look for the other safe-haven markets to also benefit: gold and the U.S. dollar.



U.S. Dollar Index: The weekly continuation chart for U.S. dollar index futures shows a bullish “outside week” up was scored last week. Also, the price downtrend on the weekly chart was negated. The greenback bulls have gained good upside technical momentum. I suspect the U.S. dollar index will continue to trend sideways to higher in the coming weeks, or longer. That’s a bearish element for the raw commodity sector. Most major commodities are priced in U.S. dollars on the world markets. When the dollar appreciates, it makes those commodities more expensive to purchase with non-U.S. currency.



British Pound: The Brexit vote late last week caused the biggest one-day price fluctuation in the history of British pound and Euro currency trading. Nearby British pound futures prices fell to a new modern historical low on Friday. The serious technical damage produced on the charts suggests there is more downside pressure coming for both the pound and the Euro currency. Such would be a bullish element for safe-haven assets like gold, the U.S. dollar and U.S. Treasuries.



S&P Stock Futures: Friday’s price action in the U.S. stock indexes again proves that history repeats itself in the marketplace. Prices Friday saw a huge and technically bearish “outside week” down, to strongly suggest we’ve probably already seen the highs in the U.S. stock indexes for this year. Again, if that’s the case, you will see continued price appreciation in the safe-haven assets like gold.



Nymex Crude Oil: Friday’s events in the world marketplace also worked to pressure crude oil prices. However, the losses were not severe in oil and an uptrend line remains in place on the weekly continuation chart for nearby Nymex crude oil futures. Still, Friday’s price action in other markets suggests it will very difficult for crude oil prices to make headway on the upside in the coming weeks or few months.



By Jim Wyckoff, contributing to Kitco News; [e-mail]



http://www.kitco.com/news/2016-06-26/After-Friday-s-Epic-Trading-Day-This-Week-Price-Action-Now-Extra-Critical-For-Many-Markets.html