Fed Head Has Impact By Stilling Discordant Voices

March 29, 2016 - 5:12pm

 by Gary Wagner

When the head of the Fed speaks, people tend to listen more than they do to the secondary (non-voting) members. And today, Federal Reserve Chairwoman Janet Yellen delivered a crystal clear message.

The time is now less propitious than this past December when the Fed dared to raise rates. Here are a few words and phrases that she used to describe conditions and how the Fed would probably act in the near term: cautiously; too early to tell; the inflation outlook has also become somewhat more uncertain; market turbulence, and, slightly weaker.

Not exactly party-hat talk, is it? Yet there are many observers – some within the Fed – that are interpreting Yellen’s speech before the Economic Club of New York as neutral, as opposed to dovish. (The prepared remarks certainly weren’t hawkish.)

We feel it is a strong affirmation of the new release outlook and comments following the last FOMC meeting in mid March. The “slightly weaker” cited above refers to the condition of the global economy although there was some verbal shilly-shally regarding just how important that weakness is to the U.S. economy. It’s hard to believe a weaker world would help the American economy.

U.S. markets took a decidedly undecided stance. Equities seemed to like Yellen’s words, all three major indexes up on the day, even if not terribly strongly.

Somewhat counter-intuitively, gold rose significantly, even if much of the gain was from a weaker U.S. dollar. The entire precious metals complex was up on the session, platinum grabbing the title as strongest in show with a 2.45% uptick.

The dollar weakness was ranged across the whole spectrum of the currency basket. The buck was down against the yen, which implies the Japanese currency is being utilized as a haven. The same scenario held true for the Swiss franc, another haven currency.

Over in the bond department, yields on the 10-year Treasury fell, another sign that haven, or at least breathing room, was being purchased. Face prices would naturally be up.

Crude oil took a beating today, the biggest loser due mostly to the news that Iran is considered now not planning to freeze output in the near to mid term.

We have been saying for some time that there is far too much crude already in the marketplace and an impressive amount “out there,” just waiting to be tapped. Where either the souped-up demand or a serious reduction in production and supply might come from truly escapes us.

Interestingly, Yellen’s remarks spooked oil as well as she said we should be prepared for oil prices to go lower again. This is, no doubt related to her appraisal that the world economy is still slowing.

West Texas Intermediate and Brent North Sea oils were both down around 2.5% in late afternoon trading.

Wishing you as always, good trading,

Gary S. Wagner - Executive Producer

Gold Forecast: Proper Action

This morning we sent out a special trade alert recommending that our subscribers initiate long positions in gold.

Traders taking that call entered the market roughly at 1238.

Maintain your current long gold position at 1238 (current 1242).

Maintain your current stop below 1217.

 

Gold Market Forecast

Over the last few days we have been looking at technical evidence that the correction that had been in place was coming to a conclusion.

In essence we were looking for gold prices to reach a low between 1195 and 1205.

However, in yesterday's trading activity, gold prices reached in intraday low of 1206, and then quickly bounced off that price point with tremendous support, indicating we might have, in fact, seen the conclusion of the correction's low prices. 

Today, following statements made by Janet Yellin, we saw precious metals prices react in a strongly bullish manner, confirming that the former correction had concluded.

As such we issued a buy recommendation which is available for reading in Proper Action.

Trending Markets: Proper Action

This morning we sent out a special trade alert recommending that our subscribers initiate long positions in the Standard & Poor's 500 vis-à-vis the E-mini.

Traders taking that call entered their long position at roughly 2046.

Maintain your current long S&P 500 (e-mini) at 2046 (current 2048.75)

Maintain your current stop below 2020.

 

Trending Markets Forecast

Although it is a fairly rare occurrence, today we witnessed both US equities and the precious metals markets moving in tandem, strongly to the upside.

Obviously this is due to dovish remarks made by Janet Yellin in which she stated "caution" is necessary before interest rates are raised.

These statements moved the Dow Jones industrial average which was trading dramatically lower on the day to close up approximately 100 points, and the Standard & Poor's 500 to close approximately 1% higher on the day.