This week has been an interesting one in numerous respects:
First, investors now have become experts in the pegging of the Chinese Yuan. This the latest fascination of the market that is causing gyrating hip movement to take place in the overnight sessions, making for volatile trading conditions.
Secondly, we have movements taking place in the interest rate markets that are out of some economic fairy tale that nobody would believe if it wasn't happening before our bloodshot eyes. Yields continue to be obliterated, with all types of theories being bantered about as to not only why this is occurring but the fundamental changes this will create in the global economy moving forward.
Lastly, gold continues to cement itself on the path of abundant potential as the President's latest obsession is a weaker dollar, followed by publicly castrating Fed Chair Powell with a pair of rusty scissors and a blowtorch. Compromising the U.S. Dollar and the Fed simultaneously is a wondrous development for gold, as it firmly places a dunce cap on fiat, putting it in a corner without much maneuverability.
Amidst all of these entertaining developments we have a market that is doing its job rearranging the minds of investors so that they won't be able to accurately track its movements.
On Monday, during a complete panic driven meltdown, we outlined exactly why we were taking up short-term long exposure for the first time in weeks in an a note titled Taking Long Exposure Up. The final paragraph of that piece said:
In all likelihood, when looking back at this moment in time at the close of trading Friday of this week, investors will wish they were buying instead of selling. And that's all we are playing this for. A short-term surge in exposure acknowledging that markets enjoy toying with investors more than they enjoy accurately reflecting the value of the companies listed.
The next question very obviously becomes, at what point is there potential for the toying to stop? Bringing us back to the 2945 level that was described last week as everything for the market before the worst day of the year took place on Monday.
The textural nature of that level doesn't simply dissolve away. Like the sound waves of a giant bell ringing, important price points carry with them a rippling effect that stays.
The 2945 level has now become a resistance point for the market. And the reaction to that resistance level will tell us a lot about the markets intentions moving forward.
More to come.....
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