GOLD and SILVER TRADE ALERT and MARKETS UPDATE (11:15 pm EST)
It seems I was a bit premature in my assessment of the effect of Janet Yellen's press conference this afternoon. Although the DOW dropped sharply during the first 45 minutes of her speaking (which began at 2:30 pm), the market fully recovered by 4 pm and closed the day with a 288 point gain. The Fed policy statement (released at 2 pm) was carefully worded and conveyed an overall "dovish" (or "easy money") tone (to calm a fearful stock market), but it also contained some "hawkish" elements (to avoid seeming fiscally irresponsible). The Fed modified its previous statement that used the term "considerable time" in referring to how long after October they will wait before raising short-term interest rates. They replaced it with the statement: "Based on its current assessment, the Committee judges that it can be patient in beginning to normalize the stance of monetary policy." Being "patient" suggests not being in too much of a hurry to raise rates (dovish), but it also implies an underlying desire to do so (which is hawkish) and makes the Fed appear fiscally responsible. The Fed statement gave no reason for investors to think that rates will rise anytime before mid-2015. Apparently this is what the markets wanted to hear, and the broad stock market responded with a strong rally. Markets oscillated a bit during Ms.Yellen's subsequent press conference as her statements at times seemed a bit hawkish, but she managed to preserve her dovish reputation in the end and make Wall Street happy (at least for today).
Even though the DOW rose 288 points today, no technical buy signals appeared in the DOW, S&P 500 or NASDAQ charts so it is possible this surge could be a knee jerk reaction to the Fed meeting, and the broad stock market could start falling again. However, if Tuesday's lows hold (17,067 in the DOW and 1,972 in the S&P 500) we could now see a multi-week rally into early January and possibly new all-time highs. Directional momentum in all three indices is still mixed bullish and bearish so I am going to wait for a stronger bull signal before attempting to buy this potential rally. It is also worth noting that we didn't quite reach our target areas (16,800-16,900 in the DOW and 1,950 in the S&P 500) for a "full" correction. There is still time for a dip down to those levels by early next week which would be a more ideal entry point to go long. Staying on the sidelines for today.
Gold and silver prices reacted down a bit when the Fed statement was released today, but both remained above their current support areas ($1180 in gold and $15.50 in silver) and at the time of this writing (10:45 pm EST) are moving back up. There are several technical and timing factors right now pointing to a significant short-term (and possibly longer term) rally in both gold and silver, and because prices are hovering near their support levels it looks like a good time to go long with tight stop losses on both. I am therefore going to enter long positions in both metals tonight with buy orders for tomorrow's market opening. My stop loss for gold will be on a close below $1180 and for silver a close below $15.50. Because these are close stop loss points and markets are still quite volatile, there is a chance we could get "whipsawed" out of this trade. However, I would rather take a small whipsaw loss than risk a much larger loss (especially in silver) should these markets turn down. Entering long positions in gold and silver on December 18 (early morning).
Crude oil is approaching the end of a long-term (3 year) cycle that could be completed anytime between now and early 2015. Once the bottom to this cycle is in, crude could rally very significantly. Our strategy in trading crude oil now should be to go long (with tight stop losses) at turning points in this market that may represent the end of the current cycle. We are at one of those potential turning points now, and prices may have made a significant bottom on Tuesday at $53.60. As with the broad stock market, however, I want to see more technical signals that signify a bottom before I enter a long position in this market. Directional momentum is currently 100% bearish in crude charts (but it has been this bearish for almost three months now so a bullish shift could be imminent). Still out of this market but watching carefully now for technical signals that could indicate a bottom to the long-term cycle.
UPDATE ON FED MEETING (3:15 pm EST)
OK, the Fed meeting is over, the Fed statement has been released, and Janet Yellen is speaking now as I write
(3:15 pm EST). I will post a more detailed discussion of all this later this evening, but for now it appears that the Fed statement had a "dovish" tone which was cheered by the stock market at 2:00. The markets seem less enthusiastic, however, about Ms.Yellen's press conference as they have been dropping sharply since she began speaking at 2:30. Gold and silver also surged briefly earlier in the day but prices are now falling. Markets close in
45 minutes, and it would be a little premature to trade now before I have more time to assess the effect of the Fed meeting. I may give some trade alerts later tonight which would take effect tomorrow morning.
It seems I was a bit premature in my assessment of the effect of Janet Yellen's press conference this afternoon. Although the DOW dropped sharply during the first 45 minutes of her speaking (which began at 2:30 pm), the market fully recovered by 4 pm and closed the day with a 288 point gain. The Fed policy statement (released at 2 pm) was carefully worded and conveyed an overall "dovish" (or "easy money") tone (to calm a fearful stock market), but it also contained some "hawkish" elements (to avoid seeming fiscally irresponsible). The Fed modified its previous statement that used the term "considerable time" in referring to how long after October they will wait before raising short-term interest rates. They replaced it with the statement: "Based on its current assessment, the Committee judges that it can be patient in beginning to normalize the stance of monetary policy." Being "patient" suggests not being in too much of a hurry to raise rates (dovish), but it also implies an underlying desire to do so (which is hawkish) and makes the Fed appear fiscally responsible. The Fed statement gave no reason for investors to think that rates will rise anytime before mid-2015. Apparently this is what the markets wanted to hear, and the broad stock market responded with a strong rally. Markets oscillated a bit during Ms.Yellen's subsequent press conference as her statements at times seemed a bit hawkish, but she managed to preserve her dovish reputation in the end and make Wall Street happy (at least for today).
Even though the DOW rose 288 points today, no technical buy signals appeared in the DOW, S&P 500 or NASDAQ charts so it is possible this surge could be a knee jerk reaction to the Fed meeting, and the broad stock market could start falling again. However, if Tuesday's lows hold (17,067 in the DOW and 1,972 in the S&P 500) we could now see a multi-week rally into early January and possibly new all-time highs. Directional momentum in all three indices is still mixed bullish and bearish so I am going to wait for a stronger bull signal before attempting to buy this potential rally. It is also worth noting that we didn't quite reach our target areas (16,800-16,900 in the DOW and 1,950 in the S&P 500) for a "full" correction. There is still time for a dip down to those levels by early next week which would be a more ideal entry point to go long. Staying on the sidelines for today.
Gold and silver prices reacted down a bit when the Fed statement was released today, but both remained above their current support areas ($1180 in gold and $15.50 in silver) and at the time of this writing (10:45 pm EST) are moving back up. There are several technical and timing factors right now pointing to a significant short-term (and possibly longer term) rally in both gold and silver, and because prices are hovering near their support levels it looks like a good time to go long with tight stop losses on both. I am therefore going to enter long positions in both metals tonight with buy orders for tomorrow's market opening. My stop loss for gold will be on a close below $1180 and for silver a close below $15.50. Because these are close stop loss points and markets are still quite volatile, there is a chance we could get "whipsawed" out of this trade. However, I would rather take a small whipsaw loss than risk a much larger loss (especially in silver) should these markets turn down. Entering long positions in gold and silver on December 18 (early morning).
Crude oil is approaching the end of a long-term (3 year) cycle that could be completed anytime between now and early 2015. Once the bottom to this cycle is in, crude could rally very significantly. Our strategy in trading crude oil now should be to go long (with tight stop losses) at turning points in this market that may represent the end of the current cycle. We are at one of those potential turning points now, and prices may have made a significant bottom on Tuesday at $53.60. As with the broad stock market, however, I want to see more technical signals that signify a bottom before I enter a long position in this market. Directional momentum is currently 100% bearish in crude charts (but it has been this bearish for almost three months now so a bullish shift could be imminent). Still out of this market but watching carefully now for technical signals that could indicate a bottom to the long-term cycle.
UPDATE ON FED MEETING (3:15 pm EST)
OK, the Fed meeting is over, the Fed statement has been released, and Janet Yellen is speaking now as I write
(3:15 pm EST). I will post a more detailed discussion of all this later this evening, but for now it appears that the Fed statement had a "dovish" tone which was cheered by the stock market at 2:00. The markets seem less enthusiastic, however, about Ms.Yellen's press conference as they have been dropping sharply since she began speaking at 2:30. Gold and silver also surged briefly earlier in the day but prices are now falling. Markets close in
45 minutes, and it would be a little premature to trade now before I have more time to assess the effect of the Fed meeting. I may give some trade alerts later tonight which would take effect tomorrow morning.
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