With no data coming out today, the market makers had fun with the markets, not matter what you were trading today. They do this especially on Fed decision weeks and we also have options expiration on Friday. This was especially true for the stock market today where we saw the DOW down most of the day then the rug pulled from it trapping many bulls who were buying the dip. Futures are now down below 2070 after briefly hitting 2118.75 last week.
I want to note the dollar, while falling a hair today, is being resilient and this is because the Brexit vote next week is showing Great Britain will be exiting the European Union to go it alone. They are not part of the Euro to begin with but this move is being viewed as Euro negative and supporting the dollar at present.
But all eyes will be on the Fed Wednesday when they decide on raising rates or not. If they do, they are simply ignorant of the data and living in some sort of a dream world that only men and women who meet a few times a month live in and aren’t connected to reality. If they don’t, they will be viewed as weak by the CNBC types. I put a 55%/60% (should be 100%) probability that they will NOT raise rates and only lean that way as I have to think the Fed is more inclined to believe their own words that all is well rather than the data. If they do raise rates I will begin using the word “incompetent” to describe Yellen and company. If they don’t, gold should move higher past $1,300 for a potential run a bit higher, however, I think this will be the last run gold has (and silver by default) before the screws come loose by the time the Brexit vote comes in 10 days. How the British government responds to the vote will be important to watch. We don’t know the verdict for that as of yet so will have to wait and see.
One thing we do know is that fear entered the market again and the VXX rose 15%. This should be viewed as gold bullish but not always. I am also seeing the potential for a short term interest rate turn around at TLT had that spike up and now may have a spike down giving way to TBT and a little higher rates. TBT closed at 33.58 tonight and is at 33.75 after hours. As many long time readers know I have been in the buy the dip camp for TLT but for now I think it is sell time for a bit. The Fed may interfere with this analysis on Wed. but the charts and sentiment seem to point to a short term reversal.
Lots of pieces to the puzzle to watch the next few weeks.
Doug Eberhardt is a 28 year financial services veteran and precious metals broker selling gold and silver at 1% over wholesale cost. Doug has written a book to help investors understand how gold and silver fit into a diversified portfolio, how to buy gold and silver, and what metals to buy. The book; “Buy Gold and Silver Safely” is available by clicking here Contact phone number for Buy Gold and Silver Safely is 888-604-6534
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