Weekly Market Update by PLP Advisors
We have been paying particularly close attention over the past 6 weeks to the performance of DXY, the US Dollar Index. The US Dollar Index tracks the purchasing power of the US Dollar relative to the six major trading partners of the United States. Last week, we commented that the chart pattern looked like if was approaching the prior long term support line which, when penetrated to the downside, often then serves as a resistance point for price.
While that could still be the case, we think that now looks less likely than it did last week although that outcome is still the one with the highest probability. Chart One is an updated chart of the US Dollar Index. Notice from the chart that the long term support line has now been penetrated to the upside once again. From a technical analysis perspective, should the US Dollar Index rally from here, an immediate, continued decline becomes less likely.
Over the past several weeks, we have also stated that gold prices appeared to be extended and in an overbought condition. Last week, we stated that gold prices could drop back to the median price as defined by the Bollinger Band indicator drawn on Chart Two.
One can easily see looking at Chart Two that current gold prices have now fallen back to median prices. While gold prices could still fall from here; it now becomes more likely that gold price begin to rally soon. That rally in gold prices could coincide with a weaker US Dollar as well.
Over the past several weeks, the US Dollar and gold prices have been inversely correlate and very tightly inversely correlated.
Silver prices, almost always more volatile than gold prices, fell as well last week. Gold price fell 1.36% while silver prices declined 1.99%.
If you are of a mind to accumulate metals, now may be a good time to continue to add to your holdings.
Stocks rallied once again last week.
Chart Three is a chart of the Standard and Poor’s 500 on a weekly basis. Notice that prices are extended a long way from the median price as defined by the Bollinger Band indicator drawn on the chart.
However, in a strong up trend prices can remain overbought for a long period of time as has been the case with stocks.
While stocks were in a technical “no trend” area recently, they are now back in solid up trends by our measures with small-cap, mid-cap and large-cap stocks all at or near all-time nominal highs.
Corn, as well as other agricultural commodities rallies some last week although prices of agricultural commodities are still near lows.
While hurricanes have been in the news lately, there is a little reported story that may prove to be a big drag on the US banking system. According to the reputable website “Zero Hedge” (Source: http://www.zerohedge.com/news/2017-09-18/700-billion-unpaid-mortgage-balances-hurricane-harvey-and-irma-disaster-areas), there are about 300,000 borrowers in the Houston area that will become delinquent or seriously delinquent on their mortgages.
After Katrina, mortgage delinquencies spiked more that 25% and the same thing is likely to happen in Houston as some borrowers walk away from damaged properties rather than repair them.
Hurricane Irma, according to preliminary estimates will affect nearly three times as many mortgages as Harvey.
That could be bad news for a financial system that may already be showing signs of stress.
There is one more New Retirement Rules class this year that will be held on October 21, 2017. It will be held at the East Beltline Campus of Western Michigan University beginning at 9:00 AM and concluding at 2:30 PM. For more information or to register, visit www.NewRetirementRules.com.
“History teaches us the mistakes we are going to make.”