The dots are being connected after N. Korea's pass on missile launching

Technical Analysis

Author: Greg Michalowski | gold

No launch sends the markets in motion

The market - ahead of the weekend - had priced in some missile test from N. Korea. It was a holiday in the country.  Public displays of the military is a normal thing. Launching a missile would make sense. 

As a result, last week, 

  • Gold was bid up and traded at the highest level since August 2016
  • US interest rates fell with the 10 year moving toward the 2.0% level. The move took the yield to the lowest level since November 2016.
  • The dollar was lower with the USDJPY and USDCHF under pressure. The USDJPY moved to the lowest level since November 2016.  The USDCHF moved to the lower level since August 2015.
  • Stocks were a bit frightened as well with bank stocks getting hit on lower yields.  
What happened?

No missile launch.

That was the trigger to head the other way in the trends. In trading today:
  • Gold has tumbled. The price is now down nearly $20 and trading at the lows
  • US 10 year yields have risen sharply. The yield is currently up 8.1 basis points to 2.132%
  • The buying in the USDJPY and USDCHF is unrelenting. The USDJPY has been taking out level after level after gapping higher on the opening.   It is a 140 pip trading range (not counting the gap opening). The USDCHF also gapped higher and has an above average range of 111 pips.
  • US stocks are racing higher with the S&P up 1.05%. The Nasdaq up 1.11% and the Dow up 1.15%. Bank stocks? Citigroup is up 2.3% and JP Morgan is up 1.82%.  
Lots of action in the opposite direction as a result of no missile launch. However, it does not necessarily mean it is all clear with the N. Koreans. Over the weekend N. Korean officials said that the US was "begging for war" with N. Korea, not the other way around, and that there will be more "gift packages" for the US.  The nuclear tests last week were apparently part of those gifts. 

So the reversals today, may be temporary today, but all the dots were certainly connected in trading today.