MARKETS UPDATE and GOLD STRATEGY ALERT (11:45 pm EST)
Will the Fed continue to be or not be "patient"? That is the question on most market analyst's minds right now. That is, will the Federal Reserve drop the word "patient" (the word used by the Fed in previous statements) to describe its attitude about when to start raising interest rates in its statement tomorrow after the conclusion of this month's FOMC meeting? Removing that word means the Fed is getting ready to raise interest rates for the first time in nearly a decade. But when will it happen? Most analysts feel it will be in June, and most analysts expect tomorrow's Fed statement and Janet Yellen's subsequent press conference to reinforce this idea. Removing the word "patient" is being viewed by the majority of analysts as the prelude to a June rate hike. (In fact, if they don't remove it, it could mean the Fed is considering delaying a rate hike. If this happens, Wall Street exuberance, or perhaps more appropriately, "irrational exuberance", could kick the broad stock market into high gear.)
The main reason I am penning this late blog is to make readers aware of a possible gold trading opportunity for early tomorrow. As I've stated in recent blogs, the U.S. Dollar Index is extremely oversold and ripe for some sort of correction. It is now pushing against strong resistance at the 100 mark and is at a good point to back off a bit and take a breather. Rising interest rates are bullish for the dollar, and this market's expectation of a June rate hike for some time now has likely fueled the dollar rally. In other words, it has already been factored in to the dollar's value. The only thing that could push the dollar higher now would be the suggestion of a rate hike before June, and this seems unlikely at the moment. On the other hand, the postponement of a June hike would disappoint dollar bulls and would likely kick the dollar's value down. My point here is that it seems likely tomorrow's Fed statement will push the U.S. Dollar Index down (in expectation of a June or later hike), and this could kick the price of gold up. But is gold technically at a good position to turn up? Yes, it is. Gold had an intermarket bullish divergence with silver today (gold prices made a new weekly low and silver prices did not) and cycle studies point to an ideal bottom any time between now and the first week of April. If silver prices can stay above last week's low tomorrow, I may enter a long position in gold, even before the Fed's statement and Janet Yellen's press conference in the afternoon. I am again avoiding trading silver because of its high volatility and because this will likely be a short-term trade.
If the Fed and Janet Yellen deliver what analysts are expecting (i.e. confirmation of a June rate hike) then tomorrow should not be much of a game changer for the broad stock market. We are staying on the sidelines as this market remains volatile and is manifesting mixed bullish and bearish signals.
Crude oil prices made a new low today at $42.44 which is reinforcing the idea that the new cycle in crude is turning bearish. As I stated in my last blog, we will now watch for a top in any short-term rally and look to sell short. Out of this market for now.
Will the Fed continue to be or not be "patient"? That is the question on most market analyst's minds right now. That is, will the Federal Reserve drop the word "patient" (the word used by the Fed in previous statements) to describe its attitude about when to start raising interest rates in its statement tomorrow after the conclusion of this month's FOMC meeting? Removing that word means the Fed is getting ready to raise interest rates for the first time in nearly a decade. But when will it happen? Most analysts feel it will be in June, and most analysts expect tomorrow's Fed statement and Janet Yellen's subsequent press conference to reinforce this idea. Removing the word "patient" is being viewed by the majority of analysts as the prelude to a June rate hike. (In fact, if they don't remove it, it could mean the Fed is considering delaying a rate hike. If this happens, Wall Street exuberance, or perhaps more appropriately, "irrational exuberance", could kick the broad stock market into high gear.)
The main reason I am penning this late blog is to make readers aware of a possible gold trading opportunity for early tomorrow. As I've stated in recent blogs, the U.S. Dollar Index is extremely oversold and ripe for some sort of correction. It is now pushing against strong resistance at the 100 mark and is at a good point to back off a bit and take a breather. Rising interest rates are bullish for the dollar, and this market's expectation of a June rate hike for some time now has likely fueled the dollar rally. In other words, it has already been factored in to the dollar's value. The only thing that could push the dollar higher now would be the suggestion of a rate hike before June, and this seems unlikely at the moment. On the other hand, the postponement of a June hike would disappoint dollar bulls and would likely kick the dollar's value down. My point here is that it seems likely tomorrow's Fed statement will push the U.S. Dollar Index down (in expectation of a June or later hike), and this could kick the price of gold up. But is gold technically at a good position to turn up? Yes, it is. Gold had an intermarket bullish divergence with silver today (gold prices made a new weekly low and silver prices did not) and cycle studies point to an ideal bottom any time between now and the first week of April. If silver prices can stay above last week's low tomorrow, I may enter a long position in gold, even before the Fed's statement and Janet Yellen's press conference in the afternoon. I am again avoiding trading silver because of its high volatility and because this will likely be a short-term trade.
If the Fed and Janet Yellen deliver what analysts are expecting (i.e. confirmation of a June rate hike) then tomorrow should not be much of a game changer for the broad stock market. We are staying on the sidelines as this market remains volatile and is manifesting mixed bullish and bearish signals.
Crude oil prices made a new low today at $42.44 which is reinforcing the idea that the new cycle in crude is turning bearish. As I stated in my last blog, we will now watch for a top in any short-term rally and look to sell short. Out of this market for now.
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