The Federal Reserve announcement on monetary policy came out today and I have said several times in my writings, the Fed can’t raise interest rates. CNBC has said for the last 6 months that the Fed would be raising interest rates because of a strong economy. My last article on the blog showed all is not what it seems. See The Illusion of an Economic Recovery. The Fed is maintaining the language of keeping rates low for a “considerable time.”
Here is what I wrote in yesterday’s Current Thoughts;
Tomorrow’s Fed meeting is said to be a non-event according to the talking heads at CNBC. I personally don’t think the Fed will do or say anything drastic except hint at how great everything is here in the U.S. This is the last meeting before Christmas and they don’t want the markets to be rattled anymore than they are because of what’s going on in Russia with their currency the ruble.
Look for some more volatility tomorrow but expect more weakness in gold and silver moving into the Holiday’s and into next year.
Even with the Fed saying they will take their time in raising interest rates, gold fell to a two week low but silver managed a little gain on the day. The miners ended up positive for the day but very weak in a whipsaw trading day where one could have profited from either side, long or short.
With the Fed news the stock market took off today. Yesterday I said the following coming into today’s trading;
TZA gave back some of the profit from yesterday but it is still above $14. If long I would keep a stop at $14 and possibly switch to TNA for a trade into Christmas. TNA is at $68.53.
Once TZA broke $14 it was time to look at TNA for a trade and TNA didn’t disappoint closing up $6.29 at $74.82. TZA closed down 9.24% at $13.07. Merry early Christmas to the longs! Go out and get that Cuban cigar now!
UGAZ had an up day but I think I would be leaning towards DGAZ after the report comes out tomorrow morning because the forecasted weather still shows a warming trend. There is a cold loop you can see in this pattern which could make its way down to the U.S. soon enough, so if we do get the dip in Natural Gas, look to flip from DGAZ to UGAZ next week, especially if we get fresh 52 week lows. But let the weather dictate at this point and be patient and catch the trend after the supply report tomorrow.
USO did go above the $21.73 price I mentioned yesterday to a high of $22.43 before closing at $21.34. There was a 70 cent opportunity for profit to be had, but that was it. When you are catching falling knives, you are going against the trend so profit has to be taken quicker. It will be tough to trade USO tomorrow. UCO is another oil play I hope to start talking about. It had a range today of $10.83 to $12.54 on great volume. But it too will be tough to trade tomorrow.
I have to say I love the potential of trades the week the Fed meets. You literally could have played both sides of about anything and came out ahead. If you really knew about options straddles, the Fed week is the best time to use that strategy. But that’s beyond most who simply want to know when to buy physical gold and silver. A little more patience for that please.
Look for a let down tomorrow outside of the Natural Gas play. Jobs report may put more of a damper on gold and JDST is still the weekly play. Perhaps we get a bounce in gold, but look to the jobs report and the dollar for confirmation of the trend you will be looking to follow. The dollar had a real nice bounce today and that put more pressure on gold.
12-17-14 GLD CHART
12-17-14 SLV CHART
12-17-14 GDX CHART
12-17-14 GDXJ CHART
12-17-14 JNUG CHART
12-17-14 JDST CHART
12-17-14 DGAZ CHART
12-17-14 UGAZ CHART
12-17-14 TZA CHART
12-17-14 USO CHART
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About Doug EberhardtDoug 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
Disclosure:
Commodity Futures Trading Commission Futures and Options trading has large potential rewards, but also large potential risk. You must be aware of the risks and be willing to accept them in order to invest in the futures and options markets. Don’t trade with capital you can’t afford to lose. This is neither a solicitation nor an offer to Purchase/Sell futures or options. No representation is being made that any account will or is likely to achieve gains or losses similar to those discussed in this outlook. The past track record of any trading system or methodology is not necessarily indicative of future results.
All trades, patterns, charts, systems, etc. discussed in this outlook and the product materials are for illustrative purposes only and not to be construed as specific advisory recommendations. All ideas and material presented are entirely those of the author.