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A Tough Start for a Christmas Rally in Stocks

Commentaries & Views

If today is any indication of what is in store over the final two weeks of 2018, we could be in for some real volatility. U.S. stocks once again came under tremendous pressure with over 2% losses in all major indices. The Dow Jones Industrial Average lost 2.11% in trading today as it declined by 507 points and closed at 23,592.98. This decline matches the lowest close seen since March of this year.

The NASDAQ composite also gave up over 2% in trading today, as it gave up 2.23% and closed at 6,756.74 after factoring in today’s decline of almost 154 points.

On Wednesday of this week, the Federal Reserve will begin its final FOMC meeting for the year. While it is highly anticipated that they will announce and initiate a final rate hike this year, the belief is that there will be changes in their statement addressing a much more dovish stance next year.

Because these two actions will have completely opposite effects on the market, we could see some real market volatility on Thursday immediately following the conclusion of the FOMC meeting and their decision as to whether or not there is a rate increase, as well as language in the statement which speaks to their overall direction next year being announced.

The uncertainty of what the Fed is planning put serious pressure on the dollar index. The dollar declined by 30 points today, and after a net decline of 0.31% is fixed at 96.61. This weakness was partially responsible for today’s respectable rally in the precious metal’s markets with gold, silver, platinum, and palladium all showing gains on the day.

Palladium continues to be front and center by gaining almost double the gains witnessed in gold today. Palladium futures gained 1.23% and, after the addition of today’s gains of $14.40, is fixed at $1,186 per ounce. Both gold and silver exhibited approximately equal gains on the day with gold gaining 0.68% and silver gaining 0.67%.

Gold futures basis the most active February contract is currently up $8.40 today and fixed at $1,249.80.

On a technical basis, today’s gains in gold took pricing above a key level which could now again become a major support level at $1,246 per ounce. This price point is derived from the 50% Fibonacci retracement. Currently, we have minor resistance at the 200-day moving average which resides at $1258.20, with major resistance at the 0.38% Fibonacci retracement level of $1,275.70 an ounce.

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Wishing you as always, good trading,

Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.