Common Sense Prevails
The regular, everyday trader has to wonder why the sentiment of most analysts was so far off regarding the tapering that didn't happen. We would all love to see the secret book of short positions in the hands of those who had predicted tapering simply had to begin this month. Once the smoke settle from the September blowout of the QE hawks, be prepared for the drum beat to start again, this time concerning the December meetings.
We felt all along that there was little chance tapering would begin today.
Payrolls, housing and retail sales have been lagging behind economists' forecasts. As pointed out last week, the down tick in unemployment is now seen to be because so many people have left the job market, discouraged, disenfranchised and disaffected. It's no way to grown an economy.
"The economy is very uneven," said Lindsey Piegza, chief economist at Sterne, Agee & Leach Inc., Chicago. "With every report you can find a silver lining and then find two reasons to suggest growth will falter," she said. "We're seeing this consistent juxtaposition of strength and weakness."
The inconsistency is on everyone's mind and serves to keep markets volatile. Slow job growth means less retail activity, which means less manufacturing and high-tech spending on expansion. Less earning and spending mean that taxes on those actually working can't be raised. Slow hiring momentum also keeps wages subdued, thus keeping consumer purchases depressed. Consumer spending account for 70% of the U.S. economy.
One important effect of this sluggard's field day is that fewer taxes are collected, debt is more difficult to lower and must be accomplished through program spending cuts, the last of which in turn lays off more people, especially in government and the older amongst those layoffs will simply retire and draw a citizen-financed pension. Ouch. This hurts just thinking and writing about it.
We will turn now to another "crisis," albeit a manufactured one. And it highlights just why monetary policy - the Fed's strategy - has become the primary driver of the economy because the elected government has no fiscal policy and acts reprehensibly and irresponsibly during negotiations.
The Wall Street Journal reported today: "House Speaker John Boehner, (R., Ohio), under pressure from conservatives, said Wednesday that the House would vote on legislation that would link essential funding to keep the government open this fall with a cut-off of funding for the president's signature health-care law."
The United States will pass the debt-ceiling raise, no fear. But, it is just this kind of hoofs-dug-into-the-mud attitude (and this is not to say that Democrats are blameless), that prevents us from lowering debt, keeping taxes fair, and making sure all levels of society prosper.
Of course, this will tweak markets and churn volatility rates. That, in general, is good for gold.
Wishing you as always good trading,
Gary S. Wagner - Executive Producer
It might be a little early to be singing “happy days are here again” in unison, but today’s incredible upside move in the precious metals markets is technically significant. Over the last few days we have been looking at both gold and silver trading at and slightly below their respective critical support levels. We had identified 1305 to 1308 as a major support level that needed to be maintained if gold was to continue its bullish of March to the upside.
Last week’s dramatic selloff concluded with gold trading below recent support levels between 1335 and 1371. Once gold reached these lows, the next real level, and an absolutely critical level was 1300. In last night’s trading we witnessed the market dip well below 1300, in fact trading to an intraday low of 1292 per ounce.
Although I was not comfortable with positioning ourselves prior to the conclusion of this month’s FOMC meeting, immediately following remarks by fed chairman Ben Bernanke, the writing was clearly on the wall. In essence his comments reiterated the fact that economic conditions did not warrant the onset of tapering our current monetary policy.
Today’s video will outline our current trade. It will also highlight the next key resistance levels in both gold and silver, as we begin to communicate our exit strategy to our subscribers.
Proper Action :
We entered long positions in both gold and silver this morning with a special trade alert:
LONG GOLD @ 1350 maintain stop below 1331
LONG SILVER @ 22.80 maintain stop below 22.35
COT LINK See previous weeks in Historical Commitments of Traders Reports.
Click on bull below for current chart gallery
Gary S. Wagner - Executive Producer