The news last week was the big miss in new homes and the FED leak—stocks, gold, oil sold off bit while money ran into bonds pushing yields down 8 bases points on the week—a 3.5% drop. And even though some global index gained they did so only as corrective formations after five wave declines from their respective highs. Shanghai composite index and the ASX 200 are running red now this 9:18pmNY. The dollar index is up slightly with gold, WTI and US futures red.
It is obvious now that QE has produced nothing but a weak labor force, housing data that is mixed and what is good really does reflect that the problems still persist in housing and the economy as a whole. Prices are up for the upper scale homes and lacking from the mean down. Multi home is up but as a result of the massive shift from home buyers to renters. New home sales came in beating at 482K—a very nice number, however most likely from on the fence buyers expecting rates to move up soon. The killer was new home sales missing big which points to a weak economy which only adds to the FED problems.
However, I do not think they will change their narrative that rates will go up slightly as long as things keep improving as they expect. The FED has had all the reasons in the world lately for them to put raising rates off from the macro data alone. And let’s not forget about Greece, and gold and oil and rates heading south once more pointing to deflationary forces prevailing again. But this time the stock market looks to be going with them. Near term the bond market looks strong which could push rates down into the high 1s again. However, crude and gold are heading for bottoms and should be rebounding soon. Once they start heading up again, rates should do the stock market in. The buck could correct against most commodity currencies and possibly against most of its peers once rates start to tick up along with oil and gold. This has been the intermarket script.
The SPX 500 looks very bearish and if this is a third wave kickoff from the 2133 Green 2 high the index could make it down to the 1969 in a hurry. If after pulling back the index drops through this level the 1819 is the next stop. Global markets are confirming the tumble. I can’t find a single index that looks bullish at all.
Gold fell hard this week hitting a low at the 1076 and bouncing up; however in a corrective series which is taking the form of a flat. Currently the metal is carving out a wave 4 of the impulsive series which makes up the C of said flat. The index needs only one more push to about the 1105 to complete the corrective. A drop down to as low as the 1040 with then be in the cards.