There was a lot of stock movement yesterday, but by the end of the day, the major indices closed only marginally higher. Italy was still in focus, and when the 10-year Italian bond punched through 7%, the U.S. dollar rose and stocks here fell.
Several economic reports were positive, including retail sales rising more than expected and wholesale prices in October dropping at the fastest rate since February 2010. On balance the economic reports show that the economy is growing, but at a modest rate.
The Dow Jones Industrial Average rose 0.14%, the S&P 500 gained 0.48%, and the Nasdaq was up 1.09%. Volume was again light with just 780 million shares trading on the Big Board and 446 million on the Nasdaq. Advancers were ahead of decliners by about 2-to-1.
The U.S. dollar, represented here by the PowerShares DB US Dollar Index Bullish Fund (NYSE:UUP), continued higher yesterday, rising to a new intraday and closing high (since the October low). However, like the stock market, trading was light. And momentum is sagging, which may mean that we could be stuck in the current trading range on stocks for at least another week. (Find out how to use options to profit when stocks are stuck.)
While many of the world’s equity markets seek direction, with most in bear markets, some commodities are booming. In terms of dollars, the precious metals and energy sectors are in long-term uptrends. And gold is in a powerful bull market with a strong, clearly defined bullish support line on the chart of the SPDR Gold Shares (NYSE:GLD).
Silver, too, is in a bull market as can be been on the chart of the iShares Silver Trust (NYSE:SLV), but since the high early this year, it has been correcting. The correction was needed since it ran well ahead of gold for the first four months of the year.
From January to April, silver gained 56% while gold was up just 12%. But they are now closer in annual appreciation, with silver up about 20% and gold up 25%. Spot silver closed yesterday at $34.48 an ounce, and spot gold closed at $1,782.30 an ounce. At just over a ratio of 50-to-1, silver may again be in a buying range. (See the Trade of the Day.)
Crude oil has also been moving higher, but not at the rate of the metals. Yesterday, spot light sweet crude closed at $99.22 a barrel, up from the high $80s in January. And the Energy Select Sector SPDR (NYSE:XLE) is only up 5.8% for the year.
Conclusion: When uncertainty is at its highest the world goes to precious metals. All investors should hold a portion of their assets in gold or silver as a hedge. And speculators may want to jump on silver for a quick run before year-end.
Today’s Trading Landscape
To see a list of the companies reporting earnings today, click here.
For a list of this week’s economic reports due out, click here.
