Best of the Week
Most Popular
1. Ray Dalio: This Debt Cycle Will End Soon - John_Mauldin
2.Stock Market Dow Plunge Following Fake US - China Trade War Truce - Nadeem_Walayat
3.UK House Prices 2019 No Deal BrExit 30% Crash Warning! - Nadeem_Walayat
4.What the Oil Short-sellers and OPEC Don’t Know about Peak Shale - Andrew_Butter
5.Stock Market Crashed While the Yield Curve Inverted - Troy_Bombardia
6.More Late-cycle Signs for the Stock Market and What’s Next - Troy_Bombardia
7.US Economy Will Deteriorate Over Next Half Year. What this Means for Stocks - Troy_Bombardia
8.TICK TOCK, Counting Down to the Next Recession - James_Quinn
9.How Theresa May Put Britain on the Path Towards BrExit Civil War - Nadeem_Walayat
10.This Is the End of Trump’s Economic Sugar High - Patrick_Watson
Last 7 days
Gold Price – US$700 Or US$7000? - 16th Jan 19
Commodities Are the Right Story for 2019 - 16th Jan 19
Bitcoin Price Wavers - 15th Jan 19
History Shows That “Disruptor Stocks” Will Make You the Most Money in a Bear Market - 15th Jan 19
What Will the Stock Market Do Around Earnings Season - 15th Jan 19
2018-2019 Pop Goes The Debt Bubble - 15th Jan 19
Are Global Stock Markets About To Rally 10 Percent? - 15th Jan 19
Here's something to make you money in 2019 - 15th Jan 19
Theresa May to Lose by Over 200 Votes as Remain MP's Plot Subverting Brexit - 15th Jan 19
Europe is Burning - 14th Jan 19
S&P 500 Bounces Off 2,600, Downward Reversal? - 14th Jan 19
Gold A Rally or a Bull Market? - 14th Jan 19
Gold Stocks, Dollar and Oil Cycle Moves to Profit from in 2019 - 14th Jan 19
How To Profit From The Death Of Las Vegas - 14th Jan 19
Real Reason for Land Rover Crisis is Poor Quality of Build - 14th Jan 19
Stock Market Looking Toppy! - 13th Jan 19
Liquidity, Money Supply, and Insolvency - 13th Jan 19
Top Ten Trends Lead to Gold Price - 13th Jan 19
Silver: A Long Term Perspective - 13th Jan 19
Trump's Impeachment? Watch the Stock Market - 12th Jan 19
Big Silver Move Foreshadowed as Industrial Panic Looms - 12th Jan 19
Gold GDXJ Upside Bests GDX - 12th Jan 19
Devastating Investment Losses Are Coming: What Is Your Advisor Doing About It? - 12th Jan 19
Things to do Before Choosing the Right Credit Card - 12th Jan 19
Japanese Yen Outlook In 2019 - 11th Jan 19
Yield curve suggests that US Recession is near: Trading Setups - 11th Jan 19
How Unrealistic Return Assumptions Are Ruining Your Stocks Portfolio - 10th Jan 19
What’s Next for the US Dollar, Gold, Stocks & Bonds? - 10th Jan 19
America's New Africa Strategy - 10th Jan 19
Gold Mine Production by Country - 10th Jan 19
Gold, Stocks and the Flattening Yield Curve - 10th Jan 19
Silver Price Trend Forecast Target for 2019 - 10th Jan 19
Silver Price Trend Forecast 2019 - 9th Jan 19
Did Strong December Payrolls Push Gold Prices Up? - 8th Jan 19
How to Spot A Tradable Stock Market Top? - 8th Jan 19
Why 90% of Traders Lose - 8th Jan 19
Breadth is Very Strong While Stocks are Surging. What’s Next for Stocks - 8th Jan 19
Half of Investment-Grade Bonds Are Just One Step from Junk Status - 7th Jan 19
Stocks Rallied Again, Still Just an Upward Correction? - 7th Jan 19
Gold Golden Long-Term Opportunity - 7th Jan 19

Market Oracle FREE Newsletter

Bitcoin Analysis and Trend Forecast 2019

FOMC Bring on the Clowns, Dollar, Gold and Bonds

Stock-Markets / Financial Markets 2016 Mar 17, 2016 - 12:14 PM GMT

By: Dan_Norcini

Stock-Markets

Honestly, more and more that seems to be the best phrase to describe when waiting for these FOMC statements to be revealed.

If we are not seeing a case of deliberate attempts to break the back of their own currencies among these Central Bankers, then "Scotty, beam me up!"

With the Fed Fund futures showing sharp increases AHEAD of the FOMC statement of rate hike probabilities, today's ultra dovish statement had everyone positioned on the wrong side of the currency markets yet once again. The result was yet another unleashed chaos courtesy of our Central Bankers.


The Dollar collapse, combined with the production cut numbers in oil from the EIA this morning, lit a fire under the energy markets. The fire also spread to the mining shares and into gold.

Here is a two hour chart of gold. Look at the surge in volume again. After being range bound between $1237-$1225 ahead of the report, the metal blew through the top of the range in short order and basically went vertical with barely a pause until it hit $1260 where it took a bit of a breather.

2-Hour Gold Chart

This thing now looks like it is going to try to test $1270 once more. It has garnered willing sellers above $1275 and has not been able to spend much time above that level before moving lower but that was before we knew how dovish the FOMC was. Whether or not that is a game changer is unclear but the Fed certainly did take one of the factors that would have been considered a negative away from gold with their statement today.

Two other factors remaining are currency debasement and risk.

Look at the Dollar chart.

US Dollar Index Daily Chart

Apparently 98.50 basis the USDX is too high for this Fed so out comes a dovish statement. The question is how do Draghi and company, not to mention Kuroda and company answer this??? I honestly don't know. What I do know however is that the ECB in particular must be fuming this afternoon. They just unleashed their big bazooka last week and for what? The Euro is climbing back up again.

Euro Daily Chart

Japanese Yen Daily Chart

The sharp selloff in the Dollar took gold mining stocks sharply higher with the HUI gaining a huge 6.6% today.

HUI Daily Chart

It closed through an area marked "light resistance" on the chart shown posting its highest CLOSE since May of last year. Pretty impressive stuff! The question is now, that it has managed to put itself in a realistic position to challenge heavy resistance at the April/May 2015 double top, can it finally take that out?

If it can, we should see the index at the March 2015 high near 195.

The falling HUI/Gold ratio spun on a dime and reversed higher today providing some good news for gold bulls. Notice how the ratio is moving towards that May 2015 peak as well.

HUI/Gold Ratio Daily Chart

There was another addition in the reported holdings of GLD this afternoon as well, further fodder for gold bulls.

This time it was 3 tons. Between yesterday's addition of 2 tons and today's 3, it has helped offset that very large 8.6 ton drop, the largest of the year, that took place on Monday. Amazing what a few words in an FOMC statement can do to flip sentiment!

Speaking of changing sentiment - there was a huge spike in the yield curve today after this FOMC statement. The spread between the Ten Year and the Two Year STEEPENED an astonishing 8 basis points in a single day! The bond markets were completely caught off guard by this dovish statement.

Two Year - 10-Year Spread

Now we need to see whether this is a one day wonder and the spread begins to flatten some more or if the bond players think that the dovish Fed policy will start stimulating growth and ushering in some inflation concerns.

It makes sense for the curve to steepen on the heels of a sharp selloff in the Dollar since commodities overall moved higher today ( see copper, silver, platinum, gold, energy, cattle, etc.). Everyone keeps wondering, each and every time we get something like this, whether or not, this is going to be the beginning of the long awaited drive into inflation displacing deflation concerns or whether it is yet another head fake caused by massive short covering across the commodity sector.

If it is inflationary, the long bond seemed not to know it as it barely budged today.

US Long Bond Daily Chart

It's chart pattern, while having deteriorated as it is below the 50 day moving average, still remains unclear. A fall through 160 would suggest that bond traders are beginning to move further away from deflation fears but as you can see by the falling lines on the ADX/DMI indicator, convictions are not very deep-seated either way right now.

We are back to waiting for the outcome of this grand experiment in monetary policy between low to negative interest rates and the forces of deflation and no one knows for sure what to think. Everything is SHORT TERM ORIENTED as far as these markets go with price moving in the path of least resistance on any given day. Until we see some sort of solid evidence that the Central Banks are winning, I expect this uncertainty to remain. I for one would dearly love to see a solid trend.

Dan Norcini

http://traderdan.com

Dan Norcini is a professional off-the-floor commodities trader bringing more than 25 years experience in the markets to provide a trader's insight and commentary on the day's price action. His editorial contributions and supporting technical analysis charts cover a broad range of tradable entities including the precious metals and foreign exchange markets as well as the broader commodity world including the grain and livestock markets. He is a frequent contributor to both Reuters and Dow Jones as a market analyst for the livestock sector and can be on occasion be found as a source in the Wall Street Journal's commodities section. Trader Dan has also been a regular contributor in the past at Jim Sinclair's JS Mineset and King News World as well as may other Precious Metals oriented websites.

Copyright © 2016 Dan Norcini - All Rights Reserved

All ideas, opinions, and/or forecasts, expressed or implied herein, are for informational purposes only and should not be construed as a recommendation to invest, trade, and/or speculate in the markets. Any investments, trades, and/or speculations made in light of the ideas, opinions, and/or forecasts, expressed or implied herein, are committed at your own risk, financial or otherwise. The information on this site has been prepared without regard to any particular investor’s investment objectives, financial situation, and needs. Accordingly, investors should not act on any information on this site without obtaining specific advice from their financial advisor. Past performance is no guarantee of future results.

Dan Norcini Archive

© 2005-2018 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules