MARKETS UPDATE (5:15 pm EST)
In a speech today at the Economic Club of Washington, Federal Reserve Chairwoman Janet Yellen made it fairly clear she will be supporting the first interest rate hike in nine years at the next FOMC meeting in mid-December.
Nevertheless, she emphasized that the final decision to raise rates will be dependent on economic data (which she sees as positive at the moment). These comments seem to be triggering a knee-jerk reaction on Wall Street, and the DOW was down 158 points at today's close. Could the trend turn down now? Maybe, but we are out of the recent reversal zone for the broad stock market and are fast approaching another one (the middle of next week) so I think this market could push higher into next week. Directional momentum in the S&P 500 and NASDAQ turned 100% bullish this week (the DOW is still mixed bullish and bearish) which supports this bullish view. Staying on the sidelines and still watching for a top to sell short soon.
Yellen's speech most likely triggered today's spike in the U.S. Dollar Index. The dollar surged to 100.50 mid-day and then fell sharply and appears to be closing just under 100 at the time of this writing. This is very bearish behavior, and it could be signaling a correction now. If so, we could see gold and silver prices rally. Gold fell briefly below our stop loss at $1053 intraday and made a new low, but closed the day near $1055. Silver prices dipped close to our stop loss of $13.92 but did not break it, and silver is closing back above $14. Since gold made a new weekly low and silver did not, this could be a case of bullish intermarket divergence. Next week is another reversal zone for gold and silver so even if prices drop a bit more, we are probably at or close to a significant bottom in these metals. The two major gold and silver mining company stock indices, HUI and XAU had significant bullish signals appear in their charts this week as did GDX, the gold miners ETF. This adds strength to the bullish argument for gold and silver now. A low in the cycles of these metals is near, but timing the bottom could be tricky. I am going to hold my short position in both gold and silver for now. Based on today's dollar spike, the markets may have already factored in the ECB's anticipated announcement of more QE stimulus on Thursday. We shall have to wait and see how they react tomorrow.
In a speech today at the Economic Club of Washington, Federal Reserve Chairwoman Janet Yellen made it fairly clear she will be supporting the first interest rate hike in nine years at the next FOMC meeting in mid-December.
Nevertheless, she emphasized that the final decision to raise rates will be dependent on economic data (which she sees as positive at the moment). These comments seem to be triggering a knee-jerk reaction on Wall Street, and the DOW was down 158 points at today's close. Could the trend turn down now? Maybe, but we are out of the recent reversal zone for the broad stock market and are fast approaching another one (the middle of next week) so I think this market could push higher into next week. Directional momentum in the S&P 500 and NASDAQ turned 100% bullish this week (the DOW is still mixed bullish and bearish) which supports this bullish view. Staying on the sidelines and still watching for a top to sell short soon.
Yellen's speech most likely triggered today's spike in the U.S. Dollar Index. The dollar surged to 100.50 mid-day and then fell sharply and appears to be closing just under 100 at the time of this writing. This is very bearish behavior, and it could be signaling a correction now. If so, we could see gold and silver prices rally. Gold fell briefly below our stop loss at $1053 intraday and made a new low, but closed the day near $1055. Silver prices dipped close to our stop loss of $13.92 but did not break it, and silver is closing back above $14. Since gold made a new weekly low and silver did not, this could be a case of bullish intermarket divergence. Next week is another reversal zone for gold and silver so even if prices drop a bit more, we are probably at or close to a significant bottom in these metals. The two major gold and silver mining company stock indices, HUI and XAU had significant bullish signals appear in their charts this week as did GDX, the gold miners ETF. This adds strength to the bullish argument for gold and silver now. A low in the cycles of these metals is near, but timing the bottom could be tricky. I am going to hold my short position in both gold and silver for now. Based on today's dollar spike, the markets may have already factored in the ECB's anticipated announcement of more QE stimulus on Thursday. We shall have to wait and see how they react tomorrow.
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