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Market Analysis

The Dow, Gold and Oil: 3 Assets Which Could Show Extreme Moves in 2019

December 18, 2018
BY Emma Richards

If you thinking about trading in 2019, or looking for some top tips for pairs, this artilce my be just what you’re looking for.

The Dow Halves

Yes, the US economy may be ‘cooking’, but something is wrong. The Dow Jones Stock Index has dropped over 9.0% from its October high and some analysts think this is just the beginning. Perma bears see it losing circa 50% and ending up in the 15,000 – 18,000 region.

The cause: a contraction of credit. Quite why, nobody knows, but any seismic shock which might scare the bejesus out of markets would do to cause a sudden tightening. A major bank or country defaulting, for example.

The Dow, which is an average of the 30 largest stocks in the US, has been forming what could be an ominous (H&S) topping pattern over the last year and if it breaks lower, below, say 23,000, it will be a very bearish sign. Judging from the charts it could do so as soon as the start of the year. This suggests a messy start for 2019.

Gold Surges

When investors become fearful during a crisis, for example, they take a trip to somewhere safe called ‘El Dorado’ a.k.a ‘gold’. If US stocks really to go downhill, therefore, as suggested above a major beneficiary could be the yellow metal. Statistics bear out the fact, with gold rising during most of the stock market crashes of the 21st century.

How high could it go? An initial rise to a historic ceiling at 1360-70s could be followed by a breakout all the way up to the 1790s if investors get really ‘spooked’.

Oil Drills Itself a Hole

Oil peaked at the start of October and then imploded, falling over 10.0% from its highs. The commodity has even lower to go, according to some analysts, who see the recent rise in US supply, from the growing shale oil fields, as more than offsetting rising global demand.

Ellioticians – those who study the weird and wonderful world of cycles – also see the commodity plunging in 2019 as it enters a long, strong wave 3 down, targeting the old $26 per barrel lows and possibly even surpassing them.

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