The Strongest Index
There is no doubt that the global equity markets have a stellar start of the year. No matter where you look, you see solid gains. Just to put things in perspective, the S&P500 index has had the January since 1989. It is up whopping 7.87% year-to-date. Similarly, the NASDAQ index is up 9.74% and the Dow Jones index is up nearly 7.17%. But the index which is up the most among all of them is Istanbul index, up over 14% mainly due to the stable political landscape after years of instability. The sectors which have performed the best are communication services, consumer discretionary, energy and financials.
US NFP Day Is Here
Today is the day when everyone will be looking at the most important piece of economic data: the US Non-Farm-Payroll number. Without any doubt, it is the most important economic number of the month and it sets the tone for trading for the rest of the month. The forecast for the headline number, the Non-Farm employment change is 165K while the previous reading was at 312K. The average hourly earnings number is expected to soften a little. The forecast for this is 0.3% versus the previous reading of 0.4%. The US ADP number usually sets the tone for the US NFP number and the reading for January shows that the labour market is still immensely robust in the midst of the US government shutdown. If today’s number confirms the same statement, I think it is likely that market will see that as a positive sign, but at the same time, it will be balanced by the fact, the good news is actually not good, because the Fed could change its stance towards the monetary policy.
Bulls Will Come Back With Vengence, But Not Yet
If anyone is happy by the current Fed stance, it is the dollar index bear group, they have been beaten down badly since June 2018 and it is only now they the price dollar index price has broken out of the upward channel for the first time. I think the trend for the next two quarters is going to be the very same because the Fed is no rush in changing their stance, and every single month, they are going to continue their same mantra. Of course, the word which matters the most for markets or for the bulls is “Patient” and the moment this word disappears from the Fed comments, I think the bulls would come back with vengeance.
Gold Holdings At Highest Level Since 2013
Ostensibly, any weakness in the dollar index is good news for the gold bulls. Having said this, the dollar and the gold index are not strongly correlated as one can see it by comparing the two charts. But, the fact is that there is a correlation between the two and the gold price is literally on the tear because of the strong momentum behind it. Even if one looks at the gold holdings, shown in the lower panel of the chart below, they have surged to the highest level since 2013. This confirms that this moemtum is here to stay and it is backed by acutal demand.
