The Nikkei re-opened after yesterday’s public holiday but again was sold from the open. The key banks suffered yet more liquidations eventually closing Mitsubishi UFJ -2.3%, SMFG -4.1%, Mizuho -3.7% and the main Nobel House (Nomura) was down 9.2%. Exporters also suffered Toyota, Nissan and Sharp all down between 6 and 10%. The Nikkei closed down 4.8% just below the 15k level to end an 11% decline for the week. It is worth noting that late Friday evening the Nikkei futures are currently bounced 3.5% since the Tokyo close.
European shares produced a much needed bounce ahead of the weekend and saw all core markets closing between 2 and 3% higher on the day. Energy prices were the main excuse used by dealers but prices were very stretched on the week and so profit-taking was probably expected. Oil bounced almost 11% at one stage in the day. Given the bounce in commodities shares such as BP, Tullow Oil and Total all saw healthy buying producing returns of between 8 and 11%. Anglo American was one of the better showings (+17%) but also Glencore (+12%) and some banks benefited. Deutsche Bank and Soc Gen closed +11.8% and +18% respectively.
In the US all cash markets opened firmed following Europe but then went from strength to strength. The DOW eventually closed up over 300 points (+2%) closely followed by the broader S+P (+1.9%) and the NASDAQ (+1.7%). Everyone was talking about the UAE’s proposed handling of an OPEC production discussion and it was very healthy to see them stepping-up. Monday will be interesting as we have finished an extremely difficult week on a much better note. However, as the Chinese market re-opens on Monday the US market will be closed for Presidents Day. In late trading the VIX dropped back to around 26.

Gold held onto most of Thursdays gains, traded in a very narrow $1235-40 range closing mid-price $1238. The US Treasury market however, lost a lot of their mood and closed over 9bp higher (lower price). US 10’s eventually closed 1.74% against a close Thursday of 1.65%. In Europe the German Bund faired a little better (still working that the biggest buyers remains the ECB) closing tonight at 0.265%. The US/Bund 10yr spread closes +147.5bp. Italy 10yr closed 1.64% (-6bp), Greece 10yr 11.03% (-9bp). Turkey 10yr 10.42 (-6bp) and finally 10yr Gilts closed 1.41% (+11bp).

Talk between dealers this week has been around the JPY, stocks (obviously), oil and then a huge discussion as to whether QE actually works! Especially having heard Janet Yellen’s response earlier in the week and the fact that Japan has been “active” since the mid 90’s and now the 10yr JGB trades negative! We have the G20 end of February and given we have seen huge volatility become the norm – Central Banks must be questioning the whole process themselves.

We have two Weekly Bearish Reversals in play today. The first is a key level at 15994 and the second is short-term at 15942. Certainly, a closing beneath both will warn that the Dow may break to test under the 14000 level going into as late as the week of February 22 near-term and possibly extending into March.

The Monthly Bearish Reversal will come into play if we break and that lies at 13937. This is the number that would mark a more sustainable break to the downside rather than a short-term correction. So pay attention to this number for this defines the broader-term for now. We also have a Monthly Bearish Reversal at 16015.  This is short-term. The Monthly Bearish Reversal that would signal a bear market trend into 2017 would be a Monthly closing BELOW 12470. This is where we draw the line in the sand for this move. Because March would be 10 months down from the May 2015 intraday high, that potential remains in play.

Using our What-If models, if we manage to break and test the 13000 area, then the corresponding Monthly Bullish would be generated at about the 16505 to 16590 level. From a timing perspective, the final intraday low could extend into March if we elect both of these Weekly Bearish Reversals today. So pay attend and get ready to rock and roll.

QUESTION: Mr. Armstrong. Are you calling this rally in gold a false move? What does it take to get you bullish? Will you ever be bullish?

ANSWERWhen all markets line up and display that there is a trend in motion, which is then definitive, I will clearly state so. Gold has performed in a typical manner. When it closed ABOVE our year-end number of 1044, I stated it was not as weak as it appeared. It then started to elect ONLY the Bullish Reversals, not Bearish. There was a turning point coming up and it was moving higher into it. So what is the big deal? The Dow closed lower at year-end, warning of a correction, and the euro should rally back to the 113 to 116 level. Everything was in line for a reaction, not a major long-term change in trend. That would require political reform in Europe at the very least. Here is the technical analysis for today. It shows the extreme resistance at 1315, and underlying support at the 1216 and 1207 levels. It simply is what it is. This is not opinion nonsense.

Your problem is you see the world through the eyes of gold and ignore everything else. If you dared to be objective and study the past market movements, you would see that real SUSTAINABLE trends are coordinated. You have a reaction in the euro that I warned would unfold when we elected the Yearly Bearish Reversal at 116 for the close of 2015. I said we should go back to retest that number BEFORE moving lower.