The Eagle And The Snowman

The Snowman: Given that today was a low-volume day because of the half-blizzard that toyed with new York City, there are some results we have to discount.

The Eagle: One of the underlying fundamentals we can’t sneer at is the building worry over the Fed’s meeting this week, which more and more observers are saying will result in a rate hike. (We may be wrong, but we don’t fall in that camp).

We’ll return to that in a moment. Equities are still being hurt by low energy prices, (and lower prices in other commodities), before consumer spending based on savings kicks in. Add the winter weather slowdown on low volumes and that all adds up to higher volatility. While precious metals usually thrive on volatility, stock prices do not.

Additionally, earnings shortfalls weighed on the equities markets today. Heavy hitters like Microsoft, Caterpillar and Proctor & Gamble all fell. The latter two are struggling because a higher U.S. dollar is hurting overseas sales. Durable orders were reported to have fallen by 3.4% in Q4 of 2014, perhaps a blip on the radar, but worrying nevertheless. On the other hand, U.S. consumer confidence is off the charts at over 102 on the index measure.

Gold benefits from a weaker equities picture. European indices were all down as were two of the three in Asia. Gold became more attractive. The dollar fell. That also helped gold rise. Silver road the coattails and is actually up a little more than gold in afternoon trading.

The reason the dollar softened (thereby helping the precious markets) is that cooler heads are beginning to prevail regarding when and by how much the Fed will raise interest rates. If the markets anticipate a higher interest rate in the U.S. economy, then the dollar will move higher. If those expectations are dashed, the dollar moves lower or stagnates.

We are not market insiders, so we can only read signs that the Feds, the markets and reasonable analysts send. However, we also have an appreciation for the fact that the Fed has great trepidations about the state of the U.S. economy and even greater worries about the rest of the world’s economy.

U.S. inflation is about as stable as it can get and shows signs it could go lower. Employment is lower but not setting the world on fire. There are still many cold spots geographically and by business sector in the United States. What would the rationale possibly be?

We’ll know tomorrow afternoon. Wishing you as always, good trading,