Stocks Inch Lower as Bulls Prepare a Breakout

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Equities moved lower Monday, after trading in positive territory for most of the session, as the bulls paused for breath after Friday’s rip-roaring FX-driven rally.

The reversal of the recent strength in the U.S. dollar — driven by a combination of relatively strong U.S. economic data and hawkish comments from the Federal Reserve — is fueling the rise after officials cut their estimate of the number of interest rate hikes they expect this year from four to two. That, along with evidence of a possible bounce-back in Chinese GDP growth in the second half of the year, is lifting commodity prices and thus removing a big source of recent negativism.

In the end, the Dow Jones Industrial Average lost 0.1%, the S&P 500 lost 0.2%, the Nasdaq Composite lost 0.3%, and the Russell 2000 lost 0.1%.

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Crude oil gained 1.9% to close at $47.25 a barrel. Gold gained 0.5% while silver lifted 1% — boosting the ProShares Ultra Silver (ETF) (NYSEARCA:AGQ) recommended to Edge subscribers by 3.6%.

Copper was the highlight, however, with the iPath Bloomberg Copper Subindex Total Return Sub-Index ETN (NYSEARCA:JJC) surging 5.1% to return to levels not seen since December.

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Technically, the recent period of soft market breadth — or the share of stocks participating to the upside — looks set to end as the NYSE Composite Index comes up against resistance going all the way back to July, which is when on many measures things sort of petered out. An upside breakout here would usher in a stock market melt-up scenario not unlike the currency driven rises seen in Japan, Europe and elsewhere already this year.

China has been a hot spot, with the Shanghai Composite Index up for the ninth consecutive trading session, adding another 2% today. There are reports tonight in the Chinese press that the Shanghai government, in an effort to stabilize a weakening housing market, will allow home buyers to increase their borrowing levels by up to 50% of the previous quota.

global growth

With the flow of stimulus globally increasing once more, the stage is set for a positive turn in the data as winter’s chill gives way to spring. Credit Suisse economists led by Berna Bayazitoglu demonstrate this in the chart above, which shows global growth bouncing back nicely later this year as a slowdown in the Fed’s rate hike pace, efforts in China and ongoing monetary easing by the Bank of Japan and the European Central Bank start to pay dividends along with the tailwinds of lower oil prices and a strong U.S. job market.

Anthony Mirhaydari is founder of the Edge and Edge Pro investment advisory newsletters. You can e-mail the author at anthony@edgeletter.com.

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Article printed from InvestorPlace Media, https://investorplace.com/2015/03/stocks-breakout-gld-slv-uso-jjc-agq/.

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