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What Are The Markets Telling Us? October 25th, 2019 by John Gross

The quick answer is that most metal markets look like they want to go higher, but elsewhere, it is many mixed messages.

In the precious metals department, prices are up on the week; year to date, and on a year over year basis.

Palladium has been the leader for a long time now, but silver, gold, and platinum have overcome resistance, and despite a still strong dollar, they also appear stronger as well.

In the nonferrous section, copper also broke through resistance, and a test of the previous high just below $2.70 is getting close.

Lead and zinc continue being supported by extremely low inventories, and the same holds true for nickel.

In fact, over the past two years or so, inventories of nickel held in LME warehouses have fallen 80% from about 375,000 mt to just 76,758 mt as of Friday, and of that amount, 46,200 mt are cancelled certificates, leaving only 30,558 of live warrants.

As a point of reference, one week of global nickel consumption is approximately 44,000 mt.

Whether metal is just being moved to other warehouses is debatable, but the potential of nickel retesting recent highs is a real possibility.

Aluminum and tin have been the laggards of late, nevertheless, both are holding recent support lines, and if the rest of the complex is riding a rising tide, these boats will be going with it.

Elsewhere, despite downward revisions for global growth by the IMF and other organizations, along with weaker economic reading here, equity markets around the world are, on balance quite strong, with many if not most posting double digit percentage gains on a year to date basis.

Indeed, the S&P 500 closed at 3,022.55 on Friday, just a few points below its record high 3,025.86 set in July.

Oddly, however, the Dow Jones Industrial Average finished the week at 26,958.06, down 401 points from its high of 27,359, also set in July.

So, we have the S&P headed toward its high, while the DJI is moving away from its high.

Undoubtedly someone can explain why this dichotomy is occurring, and perhaps they can also tell us why interest rates have been rising lately.

And so, the question remains – What is the message hidden in the markets?

Regards,
John


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