Recap: Week Ending June 12, 2015

June 14, 2015

Equity markets once again closed the week with little direction as markets continued their chop style trade. Last week saw a mixed bag with the Dow Jones Industrial Average closing up 0.28%. On the flip side, the NASDAQ 100 index closed the week down -0.52%. In the middle, the S&P 500 remained relativity flat closing up just 0.06%. The action that occurred last week in the markets is a continuation of the narrow range mixed activity that has been present since March of this year. The lack of conviction comes as markets are waiting the next move by the Federal Reserve in regards to interest rates. One sign that the market expects rates to rise sooner than later was the presence of lower bids in the 10-year note US Treasury auction last week. The yield on the auctioned notes came in at 2.461% vs. the previous auctions yield of 2.237%. The drop in yields signifies prices were lower, lower prices are associated with and can result from a rise in interest rates. On that note, the US Dollar did not move higher as one might expect last week, instead trading lower. On the week, the US Dollar Index closed at 94.99, which marks a 1.37-point dip or a loss of -1.43%. A rise in interest rates will cause a bid to enter the US Dollar as investors and traders will be seeking higher returns in the US currency. The positive correlation between the US Dollar and gold appears to have re-emerged with the precious metal catching a bid last week. Gold settled Friday at $1,180.60, marking a gain of $8.80 or 0.75% on the week. Recently the correlation between gold and the US Dollar has been positive; however, it appears that this relationship is ending. The end of such a relationship could likely signal a directional move in either of the prices of each product. Like gold, the price of North American crude oil closed higher last week. Friday crude settled at $59.94, ticks below that ever so important $60 level. It appears that $60 has become a point of significance in the price for crude as the price for the energy has struggled to close above it in the 2015 calendar year. There are threats and rumours circling that the oil price war is ongoing, and a dip back to 2015 lows may still be in the books.

The Toronto Stock Exchange Composite Index, or TSX, faired much worse than its US counterparts last week. The Canadian benchmark settled Friday at 14,741.15, making a weekly loss of -1.44% or -216.01. The move lower in Canadian equities comes as the prices of both crude and gold moved higher, making this move lower of even more importance. From a technical analysis standpoint, the TSX is trading at the lows which it established in mid-March of this year. This area acted as a key support zone. If the TSX does not hold these levels, a dip to prior lows of 14,285 may be in play. This past week the weekly MACD, or Moving Average Convergence Divergence indicator, showed a bearish crossover, signalling that the market is rolling over. The last time this occurred was in early September of 2014, and the value of the TSX fell by 13% before bottoming. It is important that investors and traders keep their eye on this indicator to see if this is just a blip or the start of something big.

 

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