The massive rally that pushed gold to record heights about $2,000 an ounce came to a violent end yesterday as the metal had its biggest drop in seven years after bond yields spiked higher.  The catalyst is an expected flood of government and corporate bond issuance amplified by a stronger reading than expected for US producer prices.

Some also pointed to Russia’s claim that it has a COVID vaccine and hopes to have mass inoculations “soon.”

Continuing with the theme of violent rotation, the rotation from growth to value is gaining momentum.  As written the other day, according to Raymond James Apple is worth more than the entire Russell 2000, an imbalance that is beyond historical proportions.  Any selling of massively over owned Apple and buying into massively under owned value will have an outsized impact.

Will this trend continue?  Millions will be made and lost if such a transition is at hand.  As noted many times, today is an extreme abnormality as “growth companies” are today’s greatest capitalized companies that everyone owns, hoping that these issues will find even more buyers to become even more over owned.

Historically growth companies are the smaller, underfollowed entities that are on the verge of major sales growth that drives share appreciation.

Commenting about yesterday’s market action, selling accelerated in the mega sized tech companies following headlines that a stimulus package might not be possible until September.  The NASDAQ ended down about 1.70%. The Dow also reversed direction ending down about 0.38%.

Last night the foreign markets were up.   London was up 1.17%, Paris up 0.33% and Frankfurt down 0.11%.  China was down 0.62%, s Japan up 0.41% and Hang Sang up 1.42%.

The Dow should open nominally higher.  Gold and silver also rebounded and oil is trading at a five-month high.  The 10-year is off 8/32 to yield 0.68%.


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