MARKETS UPDATE (8:00 pm EST)
The U.S. Federal Reserve released the minutes of its June policy meeting this afternoon and, as has been the case with most FOMC meetings recently, there were no surprises or major changes to the ongoing policies of bond purchase reductions (QE tapering) and low interest rates. The Fed did, however, specify an end date for its asset purchasing program in October as long as, quote, "... the economy progresses about as the Committee expects...". The Fed minutes were less specific in indicating when the end of the current near-zero interest rate policy would come, but there was much discussion on how this could be accomplished. The Fed has recently stated that it will not begin raising interest rates until "a considerable time" after the asset purchase program (QE) ends. Although the Fed is vague on this time, many economic analysts anticipate that rate hikes could begin in the summer of 2015. Of course, as with the asset purchase reductions, everything is dependent on how well the economy is doing. The minutes of the meeting show Committee members expressing different opinions on the future of the U.S. economy with concern focused on economic developments abroad and their potential impact on U.S. monetary policy. Some members pointed to the asset purchase programs of Japan, England and Europe as boosting the potential economic outlook of these countries and helping to moderate inflation in the U.S. while others expressed concern that these programs will have a negative long-term effect on the global economy. ( I agree with the latter. Interestingly, a market analyst that I follow recently pointed out that the chart of the London Financial Times Index (FTSE) seems to be forming a giant triple top pattern which may indicate it is about to enter a major bear market).
I have rambled a bit here so let me get back on track and give a brief update on today's markets. The broad stock market seemed unfazed by the Fed's announcement of ending QE in October, and even a discussion of the inevitable raising of interest rates didn't stop the DOW from rallying 79 points. This market seems very bullish and we could see more rallying into the end of the month. If we do, it could lead to a "blow off" top from which a significant correction would follow. On the other hand, the market is very overbought and susceptible to panic selling, and this may temper any rally (or turn it down prematurely). July 15 -31 could see a major directional turn in the broad stock market, and ideally it will be from a high. Since we are so close to entering that timing window, my main trading strategy is still to wait for a high later this month to sell short. Still on the sidelines.
Gold and silver metals and mining company stocks continue to look bullish but are still susceptible to a correction right now. There are technical signals suggesting some volatility in the precious metals this week so we don't want to get too concerned over the next few days with minor price fluctuations. Ideally, I still want to see a low over the next several weeks to buy, but there is a possibility of gold and silver taking off from here. There is important resistance for gold around $1370 - $1380, and until that level is breached there is a good chance for another correction. If precious metal prices rise over the next two weeks but stay under $1400, then we could get a top instead of a bottom to trade and a good opportunity to short sell these metals as they fall into their final cycle bottoms. My bias, however, is still for a low by the end of the month and an opportunity to go long. Still on the sidelines.
The cycle picture for crude oil is now indicating the potential for a correction as low as $100. Supporting this is a major bearish momentum signal that appeared in crude charts on Monday. Directional momentum is now mixed bullish and bearish again which makes me a little cautious about going long. However, if prices do get to $100 and find support, that could be an ideal spot to buy. We will wait and see how low this correction will go. Out of this market for now.
The U.S. Federal Reserve released the minutes of its June policy meeting this afternoon and, as has been the case with most FOMC meetings recently, there were no surprises or major changes to the ongoing policies of bond purchase reductions (QE tapering) and low interest rates. The Fed did, however, specify an end date for its asset purchasing program in October as long as, quote, "... the economy progresses about as the Committee expects...". The Fed minutes were less specific in indicating when the end of the current near-zero interest rate policy would come, but there was much discussion on how this could be accomplished. The Fed has recently stated that it will not begin raising interest rates until "a considerable time" after the asset purchase program (QE) ends. Although the Fed is vague on this time, many economic analysts anticipate that rate hikes could begin in the summer of 2015. Of course, as with the asset purchase reductions, everything is dependent on how well the economy is doing. The minutes of the meeting show Committee members expressing different opinions on the future of the U.S. economy with concern focused on economic developments abroad and their potential impact on U.S. monetary policy. Some members pointed to the asset purchase programs of Japan, England and Europe as boosting the potential economic outlook of these countries and helping to moderate inflation in the U.S. while others expressed concern that these programs will have a negative long-term effect on the global economy. ( I agree with the latter. Interestingly, a market analyst that I follow recently pointed out that the chart of the London Financial Times Index (FTSE) seems to be forming a giant triple top pattern which may indicate it is about to enter a major bear market).
I have rambled a bit here so let me get back on track and give a brief update on today's markets. The broad stock market seemed unfazed by the Fed's announcement of ending QE in October, and even a discussion of the inevitable raising of interest rates didn't stop the DOW from rallying 79 points. This market seems very bullish and we could see more rallying into the end of the month. If we do, it could lead to a "blow off" top from which a significant correction would follow. On the other hand, the market is very overbought and susceptible to panic selling, and this may temper any rally (or turn it down prematurely). July 15 -31 could see a major directional turn in the broad stock market, and ideally it will be from a high. Since we are so close to entering that timing window, my main trading strategy is still to wait for a high later this month to sell short. Still on the sidelines.
Gold and silver metals and mining company stocks continue to look bullish but are still susceptible to a correction right now. There are technical signals suggesting some volatility in the precious metals this week so we don't want to get too concerned over the next few days with minor price fluctuations. Ideally, I still want to see a low over the next several weeks to buy, but there is a possibility of gold and silver taking off from here. There is important resistance for gold around $1370 - $1380, and until that level is breached there is a good chance for another correction. If precious metal prices rise over the next two weeks but stay under $1400, then we could get a top instead of a bottom to trade and a good opportunity to short sell these metals as they fall into their final cycle bottoms. My bias, however, is still for a low by the end of the month and an opportunity to go long. Still on the sidelines.
The cycle picture for crude oil is now indicating the potential for a correction as low as $100. Supporting this is a major bearish momentum signal that appeared in crude charts on Monday. Directional momentum is now mixed bullish and bearish again which makes me a little cautious about going long. However, if prices do get to $100 and find support, that could be an ideal spot to buy. We will wait and see how low this correction will go. Out of this market for now.
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