The rally in stocks paused ahead of tomorrow’s CPI update. However, gold threatens another breakout, boosted by low Treasury yields and a weakening Dollar.
Stocks
The S&P 500 stalled below resistance at 5400. The Trend Index peak below zero warns of strong selling pressure, and another test of support at 5200 is likely.
The Nasdaq QQQ ETF shows similar hesitancy at resistance at 450. Trend Index peaks below zero again warn of strong selling pressure, and we expect another test of support between 418 and 420.
Treasury Markets
Ten-year Treasury yields respected resistance at 4.0%, warning of another test of support between 3.7% and 3.8%. Trend Index peaks below zero warn of strong buying pressure, driving yields lower.
Low Treasury yields are bullish for gold.
Dollar & Gold
Declining Treasury yields are also bearish for the Dollar. Trend Index peaks below zero warn of selling pressure and we expect another test of support at 102.50.
The Japanese Yen has similarly found resistance at 148, while the Trend Index peak below zero warns of strong selling pressure. We expect another test of support between 141 and 142 against the USD.
Low Treasury yields and a weak Dollar have boosted demand for gold. Spot gold is testing resistance at its recent high of $2,475 per ounce, with Trend Index troughs above zero signaling buying pressure. A breakout is likely and would offer a target of $2,600.
Silver broke resistance at $27.50 per ounce but remains in a downtrend until recovery above $29.
Crude Oil
Brent crude broke resistance at $80 per barrel on fears of an outbreak of conflict between Iran and Israel.
Iran could carry out “significant” attacks on Israel as early as “this week,” United States National Security Council spokesman John Kirby said on Monday.
“We have to be prepared for what could be a significant set of attacks,” he told reporters, adding that Washington shared Israeli assessments that such a move “could be this week.” ~ Deutsche Welle
In other news, OPEC announced that they had cut forecasts for oil demand growth in 2024 and 2025, citing weak demand from China. The cuts may delay OPEC members’ planned production increases. (Reuters)
Conclusion
Stocks show hesitancy ahead of tomorrow’s inflation report. Further weakening of CPI is likely and is expected to lower long-term Treasury yields.
Gold is testing resistance at its recent high of $2,475 per ounce. A breakout is likely, with a target of $2,600.
Crude oil prices rallied on fears of an attack on Israel by Iran “as early as this week.” However, weak demand from China is expected to maintain the current bear market.