Rates, Gold, the Dollar and Stocks

07/12/2018 6:00 am EST

Focus: MARKETS

Mary Anne & Pamela Aden

Co-Editors, The Aden Forecast

Interest rates have been declining gradually over the past few weeks. But now, it’s getting interesting, suggests market timing experts Mary Anne and Pamela Aden, co-editors of The Aden Forecast.

The 30-year yield just hit a five-month low, below 3%. And if it stays below 3%, the mega trend will continue to be down.

The 10-year yield is also below 2.90% and both rates are set to fall further. For now, if the 10-year yield declines below 2.70%, it could fall to 2.50% but the primary trend would still be up.

So, the bottom line is, interest rates remain at a critical juncture and it’s best to stay on the sidelines until we see how this unfolds.

The U.S. Dollar Index (DXY) is feeling the heat. Lower interest rates are starting to put downward pressure on the dollar index.

It’s been resisting at 95, its October high, and if it closes back below 93.50, a renewed dollar decline will be underway (see chart below). Meanwhile, the currencies appear to be bottoming, so keep your U.S. dollar and currency positions for now.

chart 1 

Gold bounced up this week, in large part thanks to the softening U.S. dollar (see chart below). Gold’s leading indicator is approaching the lows while the dollar’s indicator is at a high. This tells us these two markets are in the process of trading places. That is, gold is probably near its low and it’ll likely soon head higher.

Meanwhile, gold shares are looking better too and that’s another positive sign. But this renewed strength won’t be reinforced until gold rises and stays above $1273. So, stay tuned and keep your positions.

chart 2

The stock market perked up in recent trading. After weeks of ongoing tensions, things eased up somewhat and this was reflected in the market. Will it last? That’s the big question and we’ll soon see.

Currently, the market will remain bullish as long as the stock indexes stay above their 65-week moving averages at 23,300 for the Dow Industrials (DJI), 6775 for Nasdaq (ND) and 10,000 for the Dow Transportations (DJT). For now, continue to keep Netflix (NFLX) but sell if it closes below $350.

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