What a week! The math is simple:
1) Traders enter the week short or underinvested, PLUS
2) Greece relief, PLUS
3) A strong Chicago PMI reversing a string of weak regional reports, PLUS
4) Strong June ISM, EQUALS
5) S&P up 5.6 percent.
This is thebest week for all the major indicessince July 2009.
Try trading this environment: the Dow has recovered all of June's losses. Active traders got hurt twice: first when they stayed long in the beginning of June, then got hurt in the first week, then again going into the last week when many were short or underinvested, and got hurt again for the reason's described above. Is it any wonder why traders are miserable with such whippy action?
Never thought you'd miss QE2 and the simple "short dollar/long commodities" trade, eh?
I've been asked several times why gold has struggled all week, while the dollar has generally been weaker.
Market analyst Ned David commented on gold in a note to clients this week titled, "Gold — No Need to Panic...Yet." Analyst John LaForge said that gold prices have been sensitive to (real) interest rates for several years; that is, periods when real rates were rising (end of 2008 or the first part of 2010, for example) have been period when gold has faced headwinds.
The notable rise in interest rates this week (10-year yields went from 2.85 to 3.2 percent, a 35-basis point rise)...is likely a major factor in mitigating gold's rise...along with less general fear, which has always been a mover of gold.
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