We’ll get to the markets but first, how about a few common sense moves from Congress? I suggest that all Federal Holidays, Memorial, July 4, Labor, and yes even Christmas and New Years all become three-day weekends. By the way, the country of Peru does this! Having a holiday fall as it does this week on a Thursday is counter-productive to everything. The Post Office and the banks close. We all know lots of folks will play ‘hooky’ on Friday and not be around for regular work. Making all these three-day weekends would eliminate the loss of productivity of mid-week holidays. It would be a boost to holiday oriented areas like state parks, as well.
Lower volume trading prior to a holiday allows those who used to be the locals or floor traders to create larger than usual moves. That and a change in mood towards metals was happening Wednesday. August gold has jumped $38. Silver futures are up $1.20. This reverses the downturn from the May 20 high. I have been bullish on gold and silver and now another bull phase begins. The metal mining stocks have badly lagged the rally. The better idea would be ETFs which hold the metal like the Sprott family Gold an Silver CEF, gold PHYS, and Silver PSLV. Silver trust SLV is a similar vehicle.
The stock market by one measure is its most over-valued level ever. A measure of investor enthusiasm is the ratio of the SPX to the VIX. That is the Standard and Poors 500 index divided by the volatility or fear index. The lower the VIX and higher the stock index, the higher the ratio becomes. Levels were as follows, dot.com peak 80, sub-prime peak 150, and pre-COVID peak 250. Now the measure is a whopping ‘what me worry’ 450. The potential for sell-offs greater than those just cited is huge.
The crude oil complex has rallied as predicted. August crude is $82. Gasoline futures are $2.55. If Team Biden did not have enough self-created problems, this will add to their worries by election day, no matter who is on their ticket. Like the miners versus the metals, energy shares badly lag the crude oil rally. Momentum measures are turning up however. Apache, ExxonMobil, and Chevron Texaco look poised to rally. Energy service stocks lag as well, my bet on Transocean (RIG) should eventually work out. It has corrected like everything else from an April 1 high.
Bond prices have fallen since mid-June. But like the metals, bonds rallied Wednesday. That should continue into August with higher bond prices and lower interest rates.
