Don't Fear The Doctor

1.) CHINA – You could make the case that this is the most hated major stock market in the world right now. Yet, the CSI 300, which is basically the Mainland China version of the S&P 500, just closed at new four-year highs. Nobody on Financial TV or Financial-X seems too interested, and the newspapers barely mention it. Some people will tell you this entire bull market is being held up by a few mega-cap stocks. That sounds great on television, but the problem is the data says otherwise. More stocks are participating, more sectors are breaking out, and more countries are joining the move. That’s what healthy bull markets look like. Participation expands.

2.) COPPER – Apparently, inflation is still quite evident in industrial metals as doctor Copper is up another 2% this morning to fresh all-time highs. And that’s not the only base/industrial metal on the move lately, with Tin up 17% in a month and Nickel up 11%. From an investor perspective, accelerating inflation with accelerating growth (still the base economic condition) is a friendly macro environment for risk assets in general. Rising base and industrial metals tend to cause industrial names to perform well.

3.) OIL – West Texas Intermediate (WTI) is down another 3.18% to $96.05 this morning after its most recent lower high on May 4 at $106.90. It is approaching strong support, so a bounce higher in the next few days would not be a huge surprise. I’ll be looking for another lower high if that bounce materializes. Interestingly, oil and gold have been trading in opposite directions on almost a tick-by-tick basis. Below is the chart of the rolling 5-day correlation of USO (oil proxy) and GLD (gold proxy) on a 5-minute basis. Something to keep in mind if there’s a reopening of the Strait of Hormuz. Gold is now in the trend zone and above $4,700. How it acts if it sees $4,840 and how oil acts if it sees $86.50 will be telling.