MARKETS UPDATE (5:15 pm EST)
The Federal Reserve's policy-setting committee (FOMC) finished its two day meeting at 2:00 this afternoon and released a policy statement that contained no surprises for investors and analysts. As expected, the Fed tapered its quantitative easing program (QE) by another $10 billion and, to the relief of many investors, seemed to be in no rush to raise interest rates. In fact, the Fed's press release stated that near zero interest rates would likely be appropriate for "a considerable time" after QE tapering ends. If QE tapering continues at the current rate it should end sometime in 2015, but the Fed's statement even went so far as to say that, "...asset purchases [QE] are not on a preset course...", implying that the QE taper could even be slowed down or stopped if economic data warrants it. Since two major investor fears over the last six or seven months have been QE tapering and the threat of rising interest rates, the dovish tone of this statement was warmly embraced by equity markets and the DOW surged up nearly 100 points in late afternoon after its release. Of course, this may be just a short-term knee jerk reaction to good news, but directional momentum in the broad stock market continues to be strongly bullish so this "thumbs up" from the Fed could be the kick that drives this market to new highs into July. As I've stated in recent blogs, I am anticipating a significant top to sell short in July as there is the potential for a major correction (10-15%) then. The next few days should tell us if today's rally will gain any legs. Still on the sidelines.
Gold and silver prices seemed little affected by today's FOMC statement with both rising only slightly. At the moment it is still unclear if the precious metals will make one more correction down and form new lows (or a double bottom) before starting a new bullish long-term cycle. If the cycle bottoms are already in, gold and silver prices could continue up from here and "breakout" to begin that new long-term uptrend. A clear break above the $1300 level in gold would suggest that this is happening. Until we see that, any rally to the $1290 area in gold and the $20 area in silver may be an opportunity to sell short. Directional momentum in gold is still strongly bearish while silver is mixed bullish and bearish which gives us mixed signals. Ideally I would like to see a new bottom in July to buy into, but if gold prices start to exceed $1300 then I may have to abandon that idea and start buying sooner. If this market is going to turn down again it should start doing so over the next several days. We will watch closely for this. Still on the sidelines.
The U.S. Dollar Index dropped sharply today, perhaps in response to the Fed's "easy money" policy statement. Nevertheless, support at 80.40 seems to be holding and directional momentum in the dollar continues to be strongly bullish. If this index stays bullish, we could see a rally that could help drive gold and silver to their final lows and ideal buy spot. Alternatively, any breakdown of the dollar now would likely propel the precious metals into a breakout. We will continue to watch this index carefully.
The Federal Reserve's policy-setting committee (FOMC) finished its two day meeting at 2:00 this afternoon and released a policy statement that contained no surprises for investors and analysts. As expected, the Fed tapered its quantitative easing program (QE) by another $10 billion and, to the relief of many investors, seemed to be in no rush to raise interest rates. In fact, the Fed's press release stated that near zero interest rates would likely be appropriate for "a considerable time" after QE tapering ends. If QE tapering continues at the current rate it should end sometime in 2015, but the Fed's statement even went so far as to say that, "...asset purchases [QE] are not on a preset course...", implying that the QE taper could even be slowed down or stopped if economic data warrants it. Since two major investor fears over the last six or seven months have been QE tapering and the threat of rising interest rates, the dovish tone of this statement was warmly embraced by equity markets and the DOW surged up nearly 100 points in late afternoon after its release. Of course, this may be just a short-term knee jerk reaction to good news, but directional momentum in the broad stock market continues to be strongly bullish so this "thumbs up" from the Fed could be the kick that drives this market to new highs into July. As I've stated in recent blogs, I am anticipating a significant top to sell short in July as there is the potential for a major correction (10-15%) then. The next few days should tell us if today's rally will gain any legs. Still on the sidelines.
Gold and silver prices seemed little affected by today's FOMC statement with both rising only slightly. At the moment it is still unclear if the precious metals will make one more correction down and form new lows (or a double bottom) before starting a new bullish long-term cycle. If the cycle bottoms are already in, gold and silver prices could continue up from here and "breakout" to begin that new long-term uptrend. A clear break above the $1300 level in gold would suggest that this is happening. Until we see that, any rally to the $1290 area in gold and the $20 area in silver may be an opportunity to sell short. Directional momentum in gold is still strongly bearish while silver is mixed bullish and bearish which gives us mixed signals. Ideally I would like to see a new bottom in July to buy into, but if gold prices start to exceed $1300 then I may have to abandon that idea and start buying sooner. If this market is going to turn down again it should start doing so over the next several days. We will watch closely for this. Still on the sidelines.
The U.S. Dollar Index dropped sharply today, perhaps in response to the Fed's "easy money" policy statement. Nevertheless, support at 80.40 seems to be holding and directional momentum in the dollar continues to be strongly bullish. If this index stays bullish, we could see a rally that could help drive gold and silver to their final lows and ideal buy spot. Alternatively, any breakdown of the dollar now would likely propel the precious metals into a breakout. We will continue to watch this index carefully.
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