Equities fell 19.44% this year, and -5.90% in December. The December drop (and the “bearish belt hold” candle print) looks quite bearish, but my forecast model isn’t yet convinced. The Financial Industry Regulatory Authority (FINRA) margin debt has fallen some 28% from peak, and shows no signs of recovering. Margin debt and the S&P 500 Index (SPX) price tend to move together, but right now, SPX is lagging a bit to the upside. Traders “bought the dip” in October/November, but there was no Santa Claus rally going into the New Year.
The buck rose 7.68 [+8.03%] to end the year at 103.27. Even after the big recent drop, that’s still the highest close for the U.S. Dollar (DX) since 2001. Is this drop just a reaction during a longer uptrend? That’s what my quarterly model says. But the close below the 200 moving average (MA) is definitely a bearish signal, and the losses during November and December look pretty ugly. Part of the driver is money returning to the EU and Japan, after their central banks both ended their decade-long 0% rate policy.
Gold inched lower this year, down 4.30 [-0.23%] to close at 1826.20. But just as the dollar is now in a downtrend, gold ended the year in an uptrend – above all three moving averages. Gold/Euros rose 5.96% this year. Gold appears to insulate us from currency moves, plus a little bit more. Armstrong likes to say that gold’s price isn’t driven by money printing, it reflects the lack of confidence in government. Glancing at a chart of Fed Balance Sheet (WALCL) vs price of gold, as well as bank loans outstanding (LOANS) vs. gold, I’d have to agree with him – there is no correlation that I can see. What does correlate? Positively: silver, platinum, aluminum, copper, the Producer Price Index (PPI), and negatively: EUR, AUD.
Winter Disability:
The ongoing “services industry” worker shortage in the U.S. remains an issue; my guess is, this will probably drive Fed policy (and rates) higher, if it does not get “fixed.” So, is the labor shortage getting fixed? Wolf looked at unemployment claims (Source – WolfStreet) to see if the very substantial rate increases have fixed the problem.
by silverchartist 
