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Wouldn’t It Be Nice? Oil and Equities Higher, Gold Slides

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What we’d like to say today is, “Relax. Don’t worry. Be happy.” That is, when it comes to thinking about the Federal Reserve and the start of its September FOMC meeting.

We’d like to say, “Follow the data,” except you’d tear yourself in two, given how contradictory the data points have been (forever, it seems like). Just today, consumer spending was up, but not as much as predicted.

However, spending has been up for two straight months now and August is a notoriously flat retail month. One note: often enough, sales figures for back-to-school shopping are late to the mix of statistics. On top of that, gasoline prices have been plummeting and driving down raw spending numbers, which are not adjusted by the Department of Commerce. In fact, consumption of gasoline was up significantly although pricing was down impressively.

So, follow which data?

Also in the energy sector, it was announced today by the White House that it distinctly does not support a move by the U.S. House of Representatives to repeal a 40-year-old ban on exports of crude oil. That helped – for a number of perverse reasons – to push U.S. crude prices higher. One would think that shutting out demand from the at-large world market would lower prices.

The rise in energy pricing provided a good assist for the Dow and for the S&P 500. Apple’s rise of almost 1.0% on the day surely pushed the NASDAQ along nicely. Follow the leader, as they say.

Which way are the equities investors betting on the outcome of the Fed meeting? All three U.S. indices are up 1.3 to 1.5%. In short, that means they are expecting no rate hike and therefore more of the easiest money ever in the U.S. economy.

The release of positive, but not stellar, news about retail sales and industrial output in the U.S. seems to be acting as a further tempering of analysis that had been saying a rate hike is inevitable come Thursday.

Interestingly, volatility has continued to decline as measured on the VIX, which certainly must be interpreted as a vote of confidence by the investment world. Confidence in what?

That regardless of what happens in two days – rate rise or no rate rise – life will go on, the Rockies won’t crumble and Gibraltar won’t tumble into the sea.

But we are just like everyone else right now… waiting, wishing and hoping. Wouldn’t it be nice to go to sleep and wake up on Thursday at 2 PM? Wouldn’t it be nice to stop talking about the FOMC?

Wishing you as always, good trading,

Gary S. Wagner - Executive Producer