The Global Macro Digest (R) Weekly Newsletter For June 5, 2016

Weekly Newsletter

For June 5, 2016


The Week in Review: The pivotal event this week was a very disappointing May jobs report that came in Friday. The jobs report showed that 38,000 new jobs had been created in May. Many economists had predicted a gain of 162,000 new jobs. The very poor U.S. jobs report on Friday spread quickly through many markets.

On the dismal jobs report U.S., equities fell. The dollar crashed hard on the expectation that the bad news would cause the Federal Reserve to postpone interest rate increases. And precious metals soared on the weaker dollar.

Despite a bad showing on Friday, the net effect for the week was that equity markets in the U.S. were flat. Overseas markets were mixed.

Close                                                     Weekly Percentage Change.

DJIA:                                      17,807.06     DOWN -0.37%

NASDAQ                              4,942.52         UP           0.18%

S&P 500                                2,099.13        FLAT       0.00%

DJTA                                      7,730.13       DOWN -0.54%

Hang Seng                          20,947.24       UP          1.80%

Shanghai Composite       2,938.68          UP          4.17%

Nikkei 225                           16,642.23      DOWN -1.14%

DAX                                       10,103.26     DOWN -1.78%

FT 100                                    6,209.63     DOWN -0.98%

Technical Indicators: The abysmal U.S. jobs report on Friday was felt in the technical indicators, as the Dow Jones Industrial Average, the S&P 500, and the NASDAQ all declined following the report. Nevertheless, the net effect was limited. Technical indicators remained fairly firm. And UP volume has been increasing fairly significantly.

Defense Stocks: Defense stocks have been very interesting lately. Several defense stocks have far exceeded the performance of the broader U.S. equity market. For example, the S&P 500 has risen 3.80% over the past 12 weeks. The following two defense stocks have far exceeded that performance.

Friday Closing Price and 12-week Percentage Change

Transdigm Group Inc. (TDG)        $264.38     UP 19.54%

Huntington Inc. (HII)                       $157.59    UP 17.55%

Energy: Energy prices have been downright erratic. Prices have reacted strongly to the slightest market information. Here are two very typical examples.

Brent Crude Percentage Price Change

May 20: “Oil Prices Under Pressure As Global Supply Outages Diminish”

Friday (5/20) DOWN -.14%

Monday (5/23) DOWN -.74%

May 24: “API Data Shows 5.1M Barrel Draw, Biggest Since December 2015”

Tuesday (5/24)  UP  0.48%

Wednesday (5/25)  UP  2.32%

The weekly change for Brent Crude Oil was a net gain of 0.65%. And for COMEX Gold there was a net gain of 2.40% for the week.

If you believe that a further decline in oil prices is imminent, you might want to consider the following inverse exchange traded funds (ETFs) that would benefit from falling oil prices.

DTO Crude Oil Double Short

DWTI Inverse Crude 3x

SCO Ultrashort Crude

DNO U.S. Short Oil

The Dollar: The dollar has been showing weakness over the past several months against every major currency except the British pound sterling. This week was no exception, except that the strongest decline occurred on Friday following the very disappointing May jobs report.

U.S. Dollar Index

Monday (5/30):  DOWN – .09%

Tuesday (5/31):  UP           .09%

Wednesday (6/1): UP           .10%

Thursday (6/2):    DOWN  -.27%

Friday (6/3):          DOWN -1.75%

Precious Metals: Just as the abysmal May jobs report on Friday caused the dollar to fall, so too the jobs report caused precious metals to soar.

COMEX gold

Monday (5/30): UP .24%

Tuesday (5/31): UP  .07%

Wednesday (6/1): DOWN – .23%

Thursday (6/2): DOWN – .17%

Friday (6/3):  UP   2.50%

Mining Companies Gains/Losses for Week Ending June 3: Naturally, mining companies reacted positively to the rising price of gold. For several weeks the mining stocks have been slipping in price, but this week they recovered a lot of ground. Here are the mining companies that we have been following:

Friday (6/3) Closing Price and Weekly Change

Randgold Resources (GOLD)   92.02 UP 10.19%

Goldcorp (GG) 18.26  UP 10.00%

Franco-Nevada Corp (FNV) 69.62 UP 10.84%

Agnico Eagle Mines (AEM) 50.16 UP 13.64%

Newcrest Mining (NCMGY) 15.44 UP 15.31%

Newmont Mining (NEM) 35.40 UP 10.76%

Barrick Gold (ABX) 19.18 UP 15.40%

Eldorado Gold (EGO) 4.67 UP 10.40%

New Gold (NGD) 4.09 UP 9.65%

The Global Macro Digest®

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