The reaction of equity markets today to Sunday's French presidential election win by centrist Emmanuel Macron was unremarkable; in fact, there was a brief 20 point sell-off in the DOW in early morning trading before the market recovered and closed with a small 5 point gain. We may have a case of "buy the rumor, sell the news" here where the markets poured most of their enthusiasm for Macron into a strong rally after his lead over Le Pen was announced two weeks ago. After that rally, equity markets leveled off as they waited for the final election results. Of course, I'm sure that Wall Street is still happy with Macron (and at least a temporary stability in the EU), so we can hope that "sell the news" is over and will not continue into this week's trading. Even if we see more selling (we are at the center of a minor reversal zone so it is possible), we won't worry too much as long as the DOW and S&P 500 remain above our stop loss points (20,379 in the DOW and 2,322 in the S&P 500). Holding my long position in the broad stock market for now.
The adage "buy the rumor, sell the news" was even more apparent in euro currency. After the announcement of Macron's lead two weeks ago, the euro commenced a strong rally that peaked with the election yesterday, but the euro was down strongly today. The U.S. dollar, of course, reversed this pattern ("sell the rumor, buy the news") and declined into the election but was up strongly today. Does this mean that the U.S. dollar is reversing its downtrend pattern? Not necessarily. The U.S. Dollar Index has a lot of resistance to overcome in the 99-100 area, and directional momentum in the dollar is still nearly 100% bearish. As I mentioned in my last blog, any close below 98.50 could be the start of a more serious correction in the dollar.
Today's dollar rally dampened gold and silver prices a bit, but we are still well above our stop loss levels ($1195 in gold and $15.65 in silver) for our long positions entered today. This week's reversal zone extends into Thursday so there is still time for prices to edge lower before reversing back up. There is support for gold in the $1220 area and again around $1200. Silver has support around $16.20 and $16. Thursday-Friday could be a major turning point for gold so if prices edge lower into the end of the week, we will watch for a reversal then. Holding my long position in gold and silver,