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A Look Through the Indices

The weekly plot of global indices and commodities is shown below

This week was a major macro news week which saw the CPI number in Europe unsurprising, the BOJ raising interest rates for the first time since 2007, UK inflation coming in slightly lower than expected on Wednesday. But the big marquee event of the week was the FOMC decision and Powell’s speech on Wednesday evening which ignited the markets as expectations on rate cuts in the US were recalibrated for 2024 with a surprise 3 cuts. This resulted in a very significant rally on Thursday which saw gold breaking out to all-time highs as the dollar receded while in the UK the FTSE100 made the biggest one day move since the 14^th Sep 23 - rallying almost 1.9 % on the day and closing near the high. It went on to add further to this on Friday closing at a new 52 week high. The mid cap 250 had a similar response to the changes in the rate environment albeit not to the same extent and didn’t clear the December '23 highs, while small cap AIM rallied less than 1% but is looking increasingly like it wants to break north. We’ll take a look at the sectors and major movers below

Looking at the global indices summary for the week below shows Japan taking the lead up over 5% on the week on the BOJ decision trailed by the Nasdaq up almost 3% with the FTSE100 up 2.6% while the S&P made 2.3% - China lagged minus 1%. So new all-time highs for the US , Japan and Europe as we move into the final week of the quarter. However, there are some signs that we may be overdue a pullback not least the dollar index back above $1O4, the formation of what looks like an exhaustion gap on the S&P 500 chart coupled with diverging RSI which is often indicative of a slowing in price momentum, and the end of month, end of quarter which often sees rebalancing and profit booking. The weekly US stock heat map below shows how much of the heavy lifting in the S&P 500 was done by the likes of Alphabet , Nvidia and Meta with Tesla staging a bit of a recovery on the week

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Global Indices, Commodities and Currencies

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US Weekly Stock Heatmap

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Weekly UK Index Changes

The mega cap FTSE 100 had a huge week up 2.6% to a new 52 week high while the FTSE 250 has turned green on the YTD while AIM eked out a meagre 0.2% and remains -3.2% in the red YTD but has cleared its 200MA and is showing a volatility squeeze on the daily which often precedes a move north

UK Indices Technicals for Week 12

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Dollar and Commodities : Does the Dollar Contine to Breakout and is Gold Setting up for a Pullback?

In last week’s wrap I highlighted that the dollar index was starting to show strength and might be signalling an unfavourable outcome from the FOMC - this proved to be wrong, at least on one count. The FOMC was indeed favourable, and the initial dollar reaction seemed to suggest that the dollar may sell off . However this proved to be temporary as the dollar rapidly reversed to rally on the week and to what looks like a breakout above the trend line see the chart below

……the dollar is starting to show some strength into the FOMC meeting next week where the path to lower rates will be in focus: any further strength will dent the commodities rally and may cause gold to pullback further WEEK 11 Wrap

The table below shows changes in prices of the composites for a number of the metals on the week . Copper turn negative, platinum down over 4%, silver down over 2% while the dollar index is up 0.6 percent - gold held onto 0.4 % on the week.

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Gold received a lot of attention this week as it made new all-time highs, however the chart may be showing signs that the yellow metal is due to pull back. This is heavily dependent on what the dollar does next week, so the key thing to watch for commodities and gold in the coming week is the relative strength of the dollar index and whether this nascent breakout above 104 is maintained and extended

Dollar Index Appears to be Breaking Above Trendline

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Copper pulls back from 11 month highs

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Is Gold Setting-up to Pullback ?

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Gold Analysis

The above chart is a weekly chart for spot gold. The yellow circles highlight previous inflexion points for rallies in gold which have ended in what is termed technically a shooting star pattern . This occurs when a new a major high is made but then results in a reversal with a long wick and a short body on the candle. This tends to be confirmed when the following week opens and closes lower. Looking at the weekly chart there is an element of symmetry, timeliness, and relative size of the rally from low to high in each of these three moves extending back over the past 3 years. What might be different this time is the macro environment, the expected interest rate moves and the fact we have just made a new all-time high in gold. What is then key in the next week is that the upward momentum continues and that we at least see a challenge of , if not a clearing of, the recent all time highs . If not there is a potential for a pullback in gold with a move to the $2130 level as a fairly normal pullback though deeper moves to the $2100 or below becoming possible. This will play into the pullbacks in precious and base metal miners , the majority of which have made significant gains over the past few weeks.

Brent Crude Continued the Breakout to the Upper Channel Line at $87

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The above chart shows how Brent oil remained bullish this week as highlighted in last week's wrap. It did encounter some resistance at the upper channel line around $87 however this was a new 2024 high and while it closed the week off its highs - it is consolidating around the 8 EMA which is bullish. If this is held then there's a good chance it will continue to rally and that oil and gas names will respond accordingly

Sectors This Week

Sector summary is show below 23 risers to 23 fallers with 695 stocks advancing on the week while 596 declined and 378 were unch

Banks and Life Insurance continue their outperformance which has been the case YTD while changes in interest rate expectations gave lifts to REITs, Home Builders, Retailers and Consumer Services. Next make a new ATH on results, as did Warpaint - see ATHS while Wicks, Kingfisher and M&S made new 52 week highs see 52Whis - TW made a new 52W hi as did Vistry as did a number of Travel names including HSW, CCL, JET2.