A Slight Readjustment and Retrenchment in Most Markets Although Oil Lags and Gold Rallies

Many of the major trends in markets that we have been watching closely turned around today, although we feel that the shift is more in the way of consolidation than a strong change of sentiment.

It was inevitable that those who are betting dovish on a Federal Reserve rate hike would start pushing the U.S. dollar down. You can call this a pro-European, post-Paris-terror-attack vote for that region, rather than any investor commentary on the strength or future of the U.S. economy.

The downward pressure on the dollar can also be read as a cashout by longs eager to put some cash into their pockets. But little has changed fundamentally. In fact, momentum may still be building regarding consensus on a Fed liftoff.

Today futures traders placed a 72% bet on the Fed raising rates next month, well up from 68% following the release of the Fed minutes just yesterday afternoon, according to the CME’s FedWatch Group.

The weakening of the greenback finally helped gold, giving the yellow metal more than half of its roughly $12 gain. The other components in the precious metal complex were also up but not quite as strongly as gold was.

The dollar slide could not rescue West Texas Intermediate crude, however. It fell a half a percent even as Brent North Sea saw a slight gain. The discrepancy in price can be ascribed to the outrageously huge inventory in U.S. storage.

In very simple terms that mean that if there are, let’s say, 38 days-worth of crude in storage bought at a certain average price, unless something catastrophic happens, oil will not rise much beyond that point for the 38 days. (Now there are all sorts of subtleties involved with the movement of the market, so please bear in mind that is a very rough picture.)

U.S. equities, perhaps because New York is the last on line to reassess Fed matters, have struggled this afternoon to show gains. At 3:30 PM in New York the three major indexes are bouncing between green and red almost minute by minute.

There was also an odd, slightly contradictory statement from United Health Care on its participation in Obamacare. That drove health stocks down 1.5%, which had a ripple effect on broader markets.

Europe and Asia showed no such shyness, although the FTSE and CAX were up very modestly. We think there will be some continued investor unsteadiness in both London and Paris that will subside as time goes on.

However, driving Europe will be what the European Central Bank will do concerning more monetary stimulus, (which Europe dearly needs). The ECB is considering adding more systemic spending to its already broad package, according to the minutes of its last policy meeting. The central bank saw "potentially worrisome" downward revisions in consumer price growth.

Wishing you as always, good trading,