We thought it would be a good time to look in on our favorite bellwether, Goldman Sachs (GS), since the extraordinarily well-connected banking firm’s shares have been sharply on the rise lately. As long as this is the case, it makes a stock market selloff most unlikely. GS has rapidly emerged from a funk after having spent nearly a month in purgatory – its penance for a wilding spree that that culminated a penny above an important Hidden Pivot resistance we’d flagged in late May at 151.24. The stock yesterday closed on a recovery high at 149.41 but looked feisty enough to keep moving higher. Most immediately, this would imply a leap of nearly 3 percent, to 153.44, but the stock has a shot at as high a 160.44 if the lower number fails to contain demand.
If the more bullish scenario were to play out, it would imply that the uptrend is likely to continue till at least July 10, a Friday, or possibly into the next week. There is nothing directly comparable in prospect for the Dow Industrials, since, for the last week or so, the blue chip average has been relatively weak in comparison to Goldman. But if financial shares should catch fire and the heat spreads to the broad averages, a run-up in the Dow to 9005, or perhaps even to 9333, is possible. Those targets represent bullish moves, respectively, of 5.5 percent, or of 9.5 percent, from yesterday’s closing price of 8529.
Gold ‘Comfortably’ Aloft
A bullish period for stocks would likely intensify the tedium that has characterized the precious metals sector lately. We forecast dull action in Comex Gold as the new week began yesterday, and the futures did nothing to surprise us. We see bullion’s tiresome action as bullish on balance, since there have been times in the not-too-distant past when a period of strength in the broad averages might have sent bullion significantly lower in search of a comfortable place to hover. However, it should not go overlooked that Gold looks plenty comfortable these days maintaining a cruising altitude above $900.
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The market action the last 6+ months tells me that if equities crash there will be considerable downward pressure on gold. It’s wishful thinking to assume otherwise.
If the dollar remains weak then the stock market will soar along with gold. The dollar is driving everything.