Inflection Point of the Summer

As the markets closed out with a bang to end the week, they have plenty to look forward to this upcoming week. The US Dollar broke above and closed above the 81 level this past Friday, the US Stock Markets plummeted as well to end on Friday, with the Dow Jones closing down 123 points and the S&P down 10. With the falling stock markets and all the geopolitical events especially in Gaza, Gold did manage to hold 1290 and close above 1300. At the very end of the day, we did get what appeared to be short covering in the yellow metal, with Gold moving quickly from 1303 to above 1308 in the final hour. Oil started the day drifting lower towards and touching $101 before having a swift rebound back through $102.

As far as OIL and GOLD are concerned, you have to be careful of the news. In my opinion through past experience, with all that has taken place in the Ukraine and Gaza the past couple of weeks, oh and by the way, do you remember Iraq being in the news a few weeks ago before these other 2 events, it's still huge mess there with the ISIS group, Gold does not appear to be garnering all that much buying interest. Things have seemed pretty dire as of late but the Gold market just does not seem too concerned at this very moment. The risk of a cease fire between Israel and Hamas or Putin pretending to be the good guy can take Gold down to lower levels in a hurry. I say this because I have seen it happen so many times throughout the years, so just be careful not buy into every headline you see. Oil on the other hand may be worth a look at going into this week. Take a look at the daily Crude Oil chart

From what I saw during Friday's trade in Oil and what I see going on globally, we just may have a recipe for higher oil prices. The past four weeks have seen huge draw downs in the US crude supply, the reason that was given for OIL trading down from 108 to 99 within a couple of weeks was that Libya was going to become a factor in exporting oil this summer. Look at this story and see what is taking place in Libya currently, click here http://www.nbcnews.com/news/world/u-s-orders-americans-evacuate-embassy-libya-n165546
Add to that, the situation in Iraq and we might have seen the lows in OIL for quite some time! Now for those that have been reading here, I was blaming the fall in Oil on slowing demand from the consumer due to the weak economy and that still may be the case if equities do indeed start crashing, the price of OIL could go lower. You will know by watching all of the markets and the price action you get in OIL, I would like to see it start the week above 102 and stay above 101 for my bullish case. If it should trade below 101, it is possible for OIL to trade back down below 100. You must be quick to adapt to the global events and the economy if you elect to be in Gold and Oil. Not for the faint of heart, especially right now!

Now on to the economic events to look ahead to for the upcoming week. We will have plenty of earnings to go along with three major events that should move the markets. Wednesday morning 2nd Quarter GDP for the US will be reported and expectations are for 2.9% growth, then in the afternoon the FED will conclude its 2 day policy meeting, Wednesday should be fun. To end the week on Friday, the US will report its unemployment number for the month of July with expectations of showing 230,000+ jobs created for the month.

By the end of this week we should have a good handle on where we are going in the Stock Markets, US Dollar and Interest Rates. Was this past week the start of a sustaining rally in the US Dollar? Does the stock market have more to go on the upside or did we start rolling over with a much deeper correction in the making? Interest rates in the US reversed their gains from Thursday and finished the week at 2.46% on the 10 Year Note, will the FED help rates lower or will we see a change of course?

Does anyone know what will happen next? No they do not, but hopefully this week we will get some good trending markets with the outcome of the big events. Be careful out there and have a great week! I will keep you posted throughout the week. Thanks for reading.

TraderMartin