Best of the Week
Most Popular
1.Are UK Savings Interest Rates Finally Starting to Rise? Best Cash ISA 2017 - Nadeem_Walayat
2.Inflation Tsunami - Supermarkets, Retail Sector Crisis 2017, EU Suicide and Burning Stocks - Nadeem_Walayat
3.Big Moves in the World Stock Markets - Big Bases - Rambus_Chartology
4.The Next Financial Implosion Is Not Going To Be About The Banks! - Gordon_T_Long
5.Why EU BrExit Single Market Access Hard line is European Union Committing Suicide - Nadeem_Walayat
6.Trump Ramps Up US Military Debt Spending In Preparations for China War - Nadeem_Walayat
7.Watch What Happens When Silver Price Hits $26...  - MoneyMetals
8.Stock Market Fake Risk, Fake Return? Market Crash? - 2nd Mar 17 - Axel_Merk
9.Global Inflation Surges, Central Banks Losing Control and Triggered the Wage Price Spiral? - Nadeem_Walayat
10.Why Gold Will Boom In 2017 - James Burgess
Last 7 days
SNP Independent Scotland's Destiny With Economic Catastrophe, the English Subsidy - IndyRef2 - 24th Mar 17
Stock Market VIX Cycles Set To Explode March/April 2017 – Part II - 23rd Mar 17
Is Now a Good Time to Invest in the US Housing Market? - 23rd Mar 17
The Stock Market Is a Present-Day Version of Pavlov’s Dog - 23rd Mar 17
US Budget - There’s Almost Nothing Left To Cut - 23rd Mar 17
Stock Market Upward Reversal Or Just Quick Rebound Before Another Leg Down? - 23rd Mar 17
Trends to Look Out For as a Modern-day Landlord - 23rd Mar 17
Here’s Why Interstate Health Insurance Won’t Fix Obamacare / Trumpcare - 23rd Mar 17
China’s Biggest Limitations Determine the Future of East Asia - 23rd Mar 17
This is About So Much More Than Trump and Brexit - 23rd Mar 17
Trump Stock Market Rally Over? 20% Bear Drop By Mid Summer? - 22nd Mar 17
Trump Added $3 Trillion in Wealth to Stock Market Participants - 22nd Mar 17
What's Next for the US Dollar, Gold and Stocks? - 22nd Mar 17
MSM Bond Market Full Nonsense Mode as ‘Trump Trades’ Unwind on Schedule - 22nd Mar 17
Peak Gold – Biggest Gold Story Not Being Reported - 22nd Mar 17
Return of Sovereign France, Europe’s Changing Landscape - 22nd Mar 17
Trump Stocks Bull Market Rolling Over? You Were Warned! - 22nd Mar 17
Stock Market Charts That Scream “This Is It” - Here’s What to Do - 22nd Mar 17
Raising the Minimum Wage Is a Jobs Killing Move - 22nd Mar 17
Potential Bottoming Patterns in Gold and Silver Precious Metals Stocks Complex... - 22nd Mar 17
UK Stagflation, Soaring Inflation CPI 2.3%, RPI 3.2%, Real 4.4% - 21st Mar 17
The Demise of the Gold and Silver Bull Run is Greatly Exaggerated - 21st Mar 17
USD Decline Continues, Pull SPX Down as well? - 21st Mar 17
Trump Watershed Budget - 21st Mar 17
How do Client Acquisition Offers Affect Businesses? - 21st Mar 17
Physical Metals Demand Plus Manipulation Suits Will Break Paper Market - 20th Mar 17
Stock Market Uncertainty Following Interest Rate Increase - Will Uptrend Continue? - 20th Mar 17
Precious Metals : Who’s in Charge ? - 20th Mar 17
Stock Market Correction Continues - 20th Mar 17
Why The Status Quo Is Under Increasing Attack By 'Populist People Power' - 20th Mar 17
Why the SNP WILL Destroy Scotland, Exit UK Single Market for EU - IndyRef2 - 19th Mar 17
Crypto Craziness: Bitcoin Plunges on Fork Concerns, Steem Skyrockets and Dash Surges Above $100 - 19th Mar 17
What ‘Ice-Nine’ Means for Your Money - 19th Mar 17
Stock Market 4 Year Cycle - 18th Mar 17
The Only Article You Need to Read to Understand the Trump Phenomenon - 17th Mar 17
Janet Yellen Just Popped the Stock Market Bubble - 17th Mar 17
Financial Crisis, Steve Eisman: Smart, Lucky, Abrasive & Now One Of Them - 17th Mar 17
Gold Cup – Horse Racing’s Greatest Show, Gambling and ‘Going for Gold’ - 17th Mar 17
Trader Education Week - Free Event to Help You Learn to Spot Trading Opportunities - 17th Mar 17
$1.4 Trillion of SPX Notionals Due to Expire - 17th Mar 17
Preserving Order Amid Change in NAFTA, U.S. Sovereignty v. WTO - 17th Mar 17
3 Maps That Explain Why Syria Raqqa Battle Will Drag On - 17th Mar 17
Crude Oil Price Outlook 2017 - Video - 16th Mar 17
Dutch and French Electons - Winners are Losers and Left is Right - 16th Mar 17
The Straddle Trade Stock Market Brief - 16th Mar 17
Gold Up 1.8%, Silver Up 2.6% After Dovish Fed Signals Slow Interest Rate Rises - 16th Mar 17
Stocks Get Close To Record High Again As Fed Hikes Interest Rates - 16th Mar 17
Scotland Second Independence Referendum War - SNP Determined to Destroy the UK - 16th Mar 17
Here’s How Pharma Is Using AI Deep Learning To Cure Aging - 16th Mar 17
Stock Market Chaos in the Chicken Coop - 15th Mar 17
Gold and Silver Price Manipulation: The Biggest Financial Crime In History - 15th Mar 17
“Ryancare” Dead on Arrival: Can We Please Now Try Single Payer? - 15th Mar 17
Fanaticism, Stock Market Crash 2017 or Continuation of Bull Market - 15th Mar 17
Stock Market Most Overvalued On Record — Worse Than 1929? - 15th Mar 17
Desperate Saudi Arabia Turns to Asia for Investment - 15th Mar 17
Startups Will Define the Future of US Employment - 15th Mar 17
Fed Rate Hikes, Fiscal vs. Monetary Policy and Why Again the Case for Gold? - 15th Mar 17
SNP Declare Scotland to Commit Economic Suicide Early 2019, 2nd Independence Referendum - 14th Mar 17

Market Oracle FREE Newsletter

Elliott Wave Trading

The Federal Reserve is Not Going To Raise Interest Rates and Destroy Gold

Interest-Rates / US Interest Rates May 19, 2016 - 06:10 PM GMT

By: Michael_Swanson

Interest-Rates

Yesterday the stock market and gold prices fell into their closing bells after the release of minutes of the Federal Reserve’s April meeting.

The Federal Reserve did not raise interest rates at that meeting, but the minutes showed that some Federal Reserve Board members hope to raise interest rates in June.


Back in December the Federal Reserve raised interest rates and predicted that it would raise rates four times in 2016.

Then the stock market dumped in January and banks in Europe showed signs of stress so the Federal Reserve got scared and was unable to raise rates at any of its meetings so far this year.

Fed fund futures contracts also pushed out any rate hikes to the Fall.

After the release of yesterday’s minutes though CNBC talking heads began to talk as if the economy were about to boom in the United States in the coming weeks and rates could go up in June or July.

However, the Fed fund futures contracts are still pricing in only a 28% chance of a June interest rate hike.

The thing is though that the media news and quick price drop in gold has scared a lot of people out of gold.

I’m hearing from people in a pure panic over gold.

Some are long and wondering if they should sell and try to buy in at a cheaper price.

Some watched it go up and then bought in at the top and are now on losses feeling like they are getting punched and afraid that the Federal Reserve is going to demolish gold.

The thing is the way your brain works it focuses on short-term daily gyrations in a market and the news of the day.

The media never talks about the big trend in the markets, but only what is happening at the moment and it really hypes up the news item of the day.

In reality the Federal Reserve is not going to raise rates in June for two reasons.

First the stock market rally that began in February has already lost steam.

For the past year we have seen that whenever the S&P 500 approaches the 2000 level or goes below it that the Federal Reserve starts to get cautious about raising interest rates and afraid to even do it.

Secondly there are no signs that some sudden economic boom is coming.

Retail sales have been stagnate this year and we have seen company after company report earnings releases in the last quarter only to see their stock dump.

If you can remember a year ago there were predictions all throughout the year from the CNBC experts and even Federal Reserve officials for rate hikes that never came over and over again. The Federal Reserve people kept saying things like they were “data dependent” and hoping to raise rates next month. Then the economic data wouldn’t get good enough and they would do nothing.

But those news stories kept people obsessed with daily stock market moves so they missed the big picture of a topped out stock market.

And with gold it is the big trend that matters now.

Gold and mining stocks have had a huge rally this year and I believe the rally is only starting and is likely to continue all year long.

But in rallies you get pauses and pullbacks.

The way to make money in the markets is to align your positions with the big trend of the market and not to get worked up over daily gyrations.

There are four stages to a financial market cycle in a stock or entire financial market. As you know you can have a bull market. Before a bull market starts though you usually have a stage one basing phase in which a market simply goes sideways and builds a base.


Then it breaks out and begins a full blown stage two bull market that typically lasts for several years. Then there is a stage three topping phase and then a stage four bear market.

There are various technical indicators you can use to determine when these stages are coming to an end so you can make the proper adjustments. That's a topic a little too big to get into now, but we can look at the basics right now. I can quickly show you one important indicator to watch to identify the trend the market is in.

That's the long-term 150-day moving average, which is simply a line plotted on a chart using the average price number of the past 150-days.

In a bull market this line slopes up on a chart and the price of the market tends to stay above it, so it acts as a nice price support level in a bull market to make for a good entry point timing mechanism.

In a bear market this line slopes down on a chart and the price of the market tends to stay below it and it acts as resistance.

So you can use this moving average to quickly identify the trend of a market. Then you can know if you should be bullish on a market or not.

For example let’s take a look at the GDX ETF, which ones mining stocks. (For disclosure purposes you need to know that I have a position in it).


GDX went through a stage one basing process starting July 2015 and ending this January.

It then surged into a new bull market as it broke through its 150 and 200-day moving averages and resistance highs of the Fall of 2015.

Now it’s 50-day moving average is acting as support.

So if it continues to pullback I’d look for that to act as potential bottoming level.

That’s at $22.13.

Below that support would be in its March trading range, which would put support somewhere above $20.00, but I doubt very much it would fall that much.

No one can predict though short-term tops and bottoms with exact precision.

That makes trying to jump in and out and time things perfectly consistently impossible.

That’s why I am content to hold a core investment position in GDX.

You see most bull markets last 3-5 years.

That means when we look back on things a year from now – heck a few weeks from now – that yesterday’s story that the Federal Reserve could raise rates this June will be completely forgotten about.

Instead everyone will be thinking about how high GDX and gold prices have gone.

At the start of a bull market it is almost all solely professionals and insiders that buy and get invested as small fries and the general public are almost always too slow and too late to the game.

Right now CNBC people never talk about gold starting a bull market.

It takes a market going up for months on end to get enough people to notice to make it worthy of the financial media.

Gold and mining stocks are still only in the first inning of a big brand new bull market and that’s the big trend item that is important to keep in mind if you are interested in getting involved in gold and mining stocks.

In big bull markets you want to hold a core position and buy on dips.

Yesterday’s drop is creating gift for those that want to buy.

For more from Mike Swanson go to www.wallstreetwindow.com.

By Michael Swanson

WallStreetWindow.com

Mike Swanson is the founder and chief editor of WallStreetWindow. He began investing and trading in 1997 and achieved a return in excess of 800% from 1997 to 2001. In 2002 he won second place in the 2002 Robbins Trading Contest and ran a hedge fund from 2003 to 2006 that generated a return of over 78% for its investors during that time frame. In 2005 out of 3,621 hedge funds tracked by HedgeFund.Net only 35 other funds had a better return that year. Mike holds a Masters Degree in history from the University of Virginia and has a knowledge of the history and political economy of the United States and the world financial markets. Besides writing about financial matters he is also working on a history of the state of Virginia. To subscribe to his free stock market newsletter click here .

Copyright © 2013 Michael Swanson - All Rights Reserved.

Disclaimer - WallStreetWindow.com is owned by Timingwallstreet, Inc of which Michael Swanson is President and sole shareholder. Both Swanson and employees and associates of Timingwallstreet, Inc. may have a position in securities which are mentioned on any of the websites or commentaries published by TimingWallStreet or any of its services and may sell or close such positions at any moment and without warning. Under no circumstances should the information received from TimingWallStreet represent a recommendation to buy, sell, or hold any security. TimingWallStreet contains the opinions of Swanson and and other financial writers and commentators. Neither Swanson, nor TimingWallstreet, Inc. provide individual investment advice and will not advise you personally concerning the nature, potential, value, or of any particular stock or investment strategy. To the extent that any of the information contained on any TimingWallStreet publications may be deemed investment advice, such information is impersonal and not tailored to the investment needs of any specific person. Past results of TimingWallStreet, Michael Swanson or other financial authors are not necessarily indicative of future performance.

TimingWallStreet does not represent the accuracy nor does it warranty the accuracy, completeness or timeliness of the statements published on its web sites, its email alerts, podcats, or other media. The information provided should therefore be used as a basis for continued, independent research into a security referenced on TimingWallStreet so that the reader forms his or her own opinion regarding any investment in a security published on any TimingWallStreet of media outlets or services. The reader therefore agrees that he or she alone bears complete responsibility for their own investment research and decisions. We are not and do not represent ourselves to be a registered investment adviser or advisory firm or company. You should consult a qualified financial advisor or stock broker before making any investment decision and to help you evaluate any information you may receive from TimingWallstreet.

Consequently, the reader understands and agrees that by using any of TimingWallStreet services, either directly or indirectly, TimingWallStreet, Inc. shall not be liable to anyone for any loss, injury or damage resulting from the use of or information attained from TimingWallStreet.

Michael Swanson Archive

© 2005-2016 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

Catching a Falling Financial Knife