Gold, China, Europe, Stock Markets

So what are we to think about a market that has had panic selling five times in four weeks… Apr 16 and 27, May 4, 6 and 14. Yes, it’s a big thing.

But perhaps an even bigger thing, not sure if it’s bigger than a sovereign default in Europe, is the Chinese stock market which has been in the news on and off… mostly off, if you’ve watched the talking heads. In any event China’s stock market is in a bear market now down over 25%. Why should we care? Because if it’s true that stock markets lead economies (it’s true) and if we accept the premise that global growth is in Asia than what, indeed, is their market telling the world?

China is trying to slow down growth to head off inflation. We’ve seen the European markets and the U.S. market react to each other, but the big, big picture beyond the currency mess is alive and well and threatening. If China’s largest trading partner is Europe and they’re putting in these austerity programs tightening their belts… how does China grow… the market sees this and gold sees this on top of the currency mess.

This is the market’s theme going forward… the incredibly delicate fragile dance between China, Europe, and the U.S.. Nonetheless, you will never hear CNBC or Bloomberg and the like scream out just “sell”. How can they? Their advertisers are folks who depend on folks like you to bring them your money to manage.

And so it goes, and so it has always been.

Friday’s action was particularly telling with higher volume in a decline… overall that little push back up by buyers on Friday now means that there will be more aggressive selling since incoming money is in weak hands. You only need to look at the weakness of the bears when the market and the bulls were in control to see that you can and will have the same reaction to the downside, i.e., buyers quickly become sellers, just as sellers during the rise became buyers as they covered and in turn aided and abetted the upside. It works both ways!!

Gold is still very much in play as it rises with a rising dollar. Oil is dropping as the dollar rises which makes sense since oil trades in USD. But gold should be going the way of oil and it isn’t, at least for now and since inflation is dead then gold is rising for another reason… see above.

The VIX index is volatile (as you would expect) having moved higher on Friday from Thursday’s low of 24.30 to a close of 31.24.

think it’s safe to say Europe will be front and center all week long and it’s news will have a tendency to overpower headlines from this week’s Wall of Worry. The good news is there’s no announcements on Friday.

About wallstreetpirate

Thirty-five years in financial services from insurance to registered investment adviser, and trader (now retired). Currently helping wanna-be traders and experienced alike as a trading coach and mentor. I've been in and around, on top of, in the middle of, and on the bottom of the stock market for a long, long time. Here's all I've learned: Trading is about behavior, psychology, and appreciating what the charts are saying technically. You can't fake it. Either you know what you're doing or you don't. And as much as this isn't rocket science, it takes knowledge and a skill set to survive.
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