So, What The Heck Just Happened?

Janet Yellen's testimony today before the Senate Banking Committee was not much out of line with what she and the semi-united Fed have been saying since its last meeting. It was marginally - and we stress marginally - more hawkish than earlier statements.

Nevertheless, her comments incited gold and silver to trade lower again. The comments about overvaluation in the tech sector drove down the NASDQ and as a result, the Dow and S&P suffered as well. (The Dow is showing a scant gain on the day.)  

Oil dropped lower by nearly 1.25% and the 10-year yield was very slightly lower. The dollar rose, adding weakness to precious metals.

We think that once the dust settles and downward technical momentum loses steam, Yellen's statements will be re-interpreted as once more dovish.

Talk about sifting the tea leaves. Chairwoman Yellen said that inflation was exactly where the Fed expected and that blips on the screen amounted to background noise.

She reiterated: "Economic activity will expand at a moderate pace over the next several years, supported by accommodative monetary policy, a waning drag from fiscal policy, the lagged effects of higher home prices and equity values, and strengthening foreign growth."

She also said that rates are likely to stay low for a "considerable period" after bond purchases end, which she said could happen following the Fed's October meeting.

Moreover, she stated that, "A high degree of monetary policy accommodation remains appropriate. Although the economy continues to improve, the recovery is not yet complete."

If there's anything hawkish in there, please tell us.

Tomorrow Yellen testifies before a parallel House committee.

There was chatter that some large blocks of futures were sold off not ten minutes into the session this morning. That later proved unfounded. We can surmise that sell orders were placed when gold did not recover any of its loss from yesterday.

A new rule? Buy on the rumor. Sell on the rumor. Do nothing on the rumor. It's pretty clear that today a lot of people chose the last. Holdings in cash spiked even before Yellen sat down.

As always, wishing you good trading,