Stocks up to start the new month, commodities runAfter closing out July with a 6.9% gain, the best month in a year, the S&P 500 added another 2.2% today. Europe and Asia both started out August with strength as the global reflation trade continues. I continue to think the long-term bull advance is back on as the panic in Europe has subsided and earnings are strong.
Today was an especially strong day for the commodity complex helped by a falling dollar. The dollar has been down 8 weeks in a row now largely a result of the euro bouncing back from the depths of despair. Roughly 58% of the dollar index (DXY) is the euro. Now that the complete collapse of the euro monetary union has been avoided, the euro has rallied from lows of $1.1876 to $1.3174 in just 8 weeks. The DXY has likewise fallen from 88.71 to 80.92, or 8.8%.
Crude oil popped back above $80 to close the day at $81.46, up $2.47. Doctor copper has continued its impressive run adding 7.8 cents today closing at $3.885. Copper has rallied 15.5% in just 11 days! Copper is far from perfectly correlated but it has been a quality leading indicator historically for equity markets.
Disclosure: Long SPY.