ELAM: Well to the DMZ of Markets

Last week we reported that a commodity rally had begun in earnest. This week a stronger U.S. Dollar has put the brakes on those advances.

The big performer this past week was the U.S. Dollar. It has fallen from 104 in January 2017 to 88 a year later. This past week it broke to the upside now trading at 91.36. As commodities are priced in U.S. Dollars, a stronger Dollar means lower commodity prices. The Dollar Index has not reversed its downward slide as there has not been a crossover of the moving averages to the upside. But it is putting a halt on oil and metal price advances.

The other star performer this week was the yield on the ten-year treasury note. It touched 3 percent for the first time since 2013. This is an inflationary sign but it is offset by the bounce in the U.S. Dollar. If the Dollar reverses to the upside, commodity prices will likely be held in check even with higher interest rates.

Wednesday, April 24 the Dow Industrials dropped intra-day about 450 points. Since then, the DJIA has recovered about 500 points. That leaves the index above the 23,330 low of Feb. 12. A positive close Friday will likely continue the consolidation another week or two.

Firms Feel Impact of Oil Rise, Wall Street Journal, Today

Giant outfits from American Airlines Group Inc. to 3M Co. have warned this week about how persistent higher oil prices are boosting their expenses this year.

Gold remains in an uptrend now testing its uptrend line. The drop below $1,322 is testing that uptrend line. After quickly rising to $17.30, silver gave back a dollar of the rise to close at $16.49 Thursday. Each metal is still in an uptrend but will need to hold support right here to affirm a continued rally.

Bell weather for the Permian Basin is the XES ETF for Energy Services. It has finally risen off a higher low to $17.31. But again, it needs a lot of follow through to reverse course to the upside. West Texas Intermediate finally broke through resistance at $66. It remains in a strong uptrend accompanied by Brent now trading at $73.90.

On the social mood front our expectation for the second Bill Cosby trial was confirmed. The first a year ago ended in a hung jury. But that was before revelations about Lauer, Weinstein, and Wynn. It only took a day for the jury to convict this time. Bear markets often bring ruin to famous celebrities and this may be a case in point.