Hiking, Seizing and Hacking Dominate Weekly News

December 16, 2016 - 5:40pm

 by Gary Wagner

This week, traders and investors certainly had a multitude of new stories to focus upon. They also have a lot to digest when it comes to how these events will affect the markets. Today’s announcement that China had seized a US drone in international waters and the information about Russian hacking to affect last month’s presidential election and the final FOMC meeting were at the forefront.

More Rate Hikes Ahead

On Wednesday of this week, the Federal Reserve concluded their final Open Market Committee for 2016. The net result of this meeting contained both anticipated and non-anticipated statements and policies by the Fed. A rate hike of 25 basis points was announced, and for the most part, was widely factored into current market pricing.  

Hawkish statements made in regards to their forward policy next year took market participants by surprise. A more aggressive policy of rate hikes in 2017 was revealed, with a new goal of three rate hikes next year rather than two.

New Record High in US equities

Although US equities closed modestly lower on the day, the Dow Jones Industrial Average closed at a new all-time record high for the week, coming within a few points of a 20,000 Dow. It opened this week at approximately 19,100, and by the conclusion of trading on Friday, closed at roughly 19,840. This week’s move is a continuation of the dynamic rally, which began immediately preceding last month’s presidential election, which moved US equity prices higher over the last six weeks.

Gold Prices Continue to Decline in Value.

While gold closed higher on the day, gold values declined another 2% this week. Now in the sixth consecutive week of lower pricing, gold has lost in excess of $200 in value since last month’s presidential election. Market sentiment continues to favor a risk on environment as US equities have moved to new record highs week over week, since the presidential election last month. Even with today’s small upside move in the precious metals complex, safe haven assets continue to be placed at the bottom of preferred assets to invest in.

Buy on Rumor, Sell on Fact

The underlying characteristics of current market sentiment continue to favor bullish sentiment for US equities and risk on assets. This is based upon the belief that President-elect Donald Trump will effectively create more prosperity in the United States by cutting taxes, removing regulations, and initiating fiscal policies which will focus on a massive infrastructure program. These beliefs have created optimism, based upon hope that our President-elect can, in fact, deliver on his promises.

At the same time, one must realize that come next month, President-elect Trump will have to put pen to paper and talk to action. Whether or not he can accomplish the bold initiatives he has spoken about will determine the future direction of risk on and safe haven assets. Up until January 20, Inauguration Day, market sentiment will be largely based upon this new optimism.

The big question is whether or not President-elect Trump can effectively implement these major changes in US policy. If President-elect Trump is not able to implement his changes, or if his brash leadership style and close-minded attitude causes him to implode, we could be at the beginning of a major bull run in gold.

Wishing you as always, good trading,

Gary S. Wagner - Executive Producer

Gold Forecast: Proper Action
We are currently flat with no active trades in gold or silver on record.
 
However, we have been strongly bearish over the last month.
 
Wednesday we laid out our current trading strategy, and traders acting upon those suggestions have implemented short positions in gold.
Gold Market Forecast

Although today’s trading activity resulted in modestly lower US equities as well as the US dollar, and modestly higher gold and silver pricing, these changes were counter to the overall trends this week. Since last month’s presidential election, we have seen certain trends develop and continue to this day.

Gold did close two percent lower on the week, and continues to decline in value, now for the sixth consecutive week. US equities as well as the US dollar had modest declines today, but maintained higher closes on a weekly basis. In fact, we saw the Dow Jones industrial average climb within 36 point of 20,000, concluding this week with a all-time record weekly high. The US dollar also continued to rally trading to a 14-year high.

We continue to assume that current market sentiment will continue throughout the rest of this year. Next week begins our holiday season and we can look for a decline in volume and a continuation of the trends which have been evident in the market for the last six weeks.