So far, the “traditional Thanksgiving rally” in the US stock market looks more like a rancid Thanksgiving turkey that belongs in the trash can.
Many investors appear to have bought the US stock market when it was peaking mainly because of their enthusiasm for President Trump. They forgot about the business cycle and the Fed and are now paying a heavy price for that folly.
Defensive stocks were mostly unchanged or higher yesterday, while growth stocks again sold off with a vengeance.
While the year-end rally may be “on the rocks”, it can still happen.
Double-click to enlarge this Dow Industrials ETF chart.
There is a nice inverse H&S bottom pattern in play. It features a high right shoulder, which is quite positive.
Having said that, the market needs to begin rallying almost immediately. That’s because many institutional investors are beginning to get quite concerned about the horrific start to their predicted year-end rally. Further price weakness will only bring more concern.
What about gold? Well, gold has performed decently in the face of the stock market meltdown, but gold price discovery is mainly related to physical market demand.
That’s been decent in India, but a bit weak in China. The SPDR fund tonnage change is basically neutral.
Double-click to enlarge.
Gold demand in China will strengthen in December as preparations for Chinese New Year begin.
Unfortunately, the weak Chinese stock market will likely keep a damper on gold demand until then.
The price action in the gold market is really quite mundane. It’s a perfect reflection of current physical market demand versus supply.
Most consumers in the West don’t want to admit they are horrifically addicted to debt. It’s much easier to look for an external scapegoat like diligent gold-oriented Chinese savers.
Former Fed Chair Yellen “tells it like it is”. The good news is that the G20 meeting is just two weeks away,and there could be discussion of the dollar at that meeting.
