Higher Low Coming
Non-Farm payroll for the month of August came out today. Unemployment dipped from 5.3-5.1. There is a lot of volatility, at one point the DOW was down 300 points. Last week we shot up to the 16650 range and I knew that pattern on the daily charts. I was looking for a pullback to the 15500-15800 and on Monday we got down to 15979. The market reacted here because of the low unemployment rate. The fear is that the Federal Reserve will raise the interest rates by a quarter of a point in September. The Federal Reserve sees the increased volatility and that the market is getting spooked. The rates haven’t been raised in 7 or 8 years and I don’t think they will raise interest rates. If they do raise rates the markets will sell off and then snap back on a bounce. I believe we will make a higher low and then we should start trading higher into the end of the year.
I said I was bullish on oil after we had a gigantic spike from the 38 range up to the 48 range. I would be looking to buy on a pullback in the 39-43 range. Even when the market sold off oil held its ground with its underlying base.
I said I would be looking to get out of gold stocks if it got up to the 1150-1160 range. Gold got up to 1147 and then traded below 1120 today. The fear of raising interest rates and its effect on the markets is causing gold to go down. ABX (Barrick Gold) printed a new low today and is down over 50% in 2015. There is a clear divergence with gold stocks making new lows while gold is not, and gold should not be heading higher. I see a similar situation with what happened in oil. The fall in oil stocks lead the way for the fall in oil from the low 60s all the way down to 38. The fall in gold stocks may be leading the way for a fall in gold.