Many Rivers To Cross

We will be crossing and recrossing the rivers of Ukraine, Russia, Gaza and Israel. To some extent we are at the mercy of the actions that happen on the ground and in the air.

Neither situation seems as if it will be resolved in the very near term. And, we still have Syria, Iraq and now a potentially oil-threatening event unfolding in Libya. While there are many lessons to be learned from all these trouble spots, the biggest take away is that countries must be energy independent in order not to fall victim to the whims of dictators and extremists.

On Wednesday, the FOMC will meet and, although there is a good chunk of economic data out this week, look for the Fed to stay the course on the tapering of QE3 bond buying and keeping interest rates put at their current low level. The last thing a nascent recovery needs is a strong dollar.

As we predicted, the U.S. economic data released today, Monday, sent mixed messages.

Stronger-than-predicted data on services sector activity on Monday had little impact on major currencies. Financial data surveyors, Markit, said its preliminary services PMI (Purchasing Managers Index) was 61.0 in July, unchanged from June and above their expectations for a reading of 59.8.

The NAR (National Association of Realtors) reported that contracts to buy previously-owned homes unexpectedly fell in June. NAR's Pending Home Sales Index, based on contracts signed last month, fell 1.1 to 102.7 and confounded economists' expectations for a 0.5 percent gain. However, that could be viewed as a statistical aberration.

Due out on Friday is the report on July employment/job creation. It is expected to come in at the 230 to 235K range. Anything much above or below that will give pause to the markets. But, as we said, this - and the other data released already - will not be influencing the Fed on Wednesday.

The dollar seems to be sending ambiguous signals today. First it weakened noticeably but it is now on the verge of pulling even for the day.

No one in currency can seem to decide whether the Fed is going to pull the trigger on higher interest rates, and, if it does, what exactly will it mean.

If energy is any kind of indicator, crude, Brent and natural gas all fell today. This is a sign of overcapacity but also a sign that, while the whole world is recovering, usage of energy is relatively stable.

We should all be keeping a close eye on earnings reports being issued by major corporations. Those are our leading indicator in the fundamental analysis area. If stocks falter in any significant way, gold and silver will prosper.

As always, wishing you good trading,