Was Janet Yellen Crowned Market Predator?
Finally, the Federal Reserve addressed what many, including myself, thought inevitable.
Starting in October, they will begin to reduce the balance sheet of $4.5 trillion and potentially raise the rates (guessing another ¼%) this year.
Why didn’t they raise the rates today?
Concerns about the recent hurricanes and low inflation, stubbornly below the 2% rate the Fed likes to see.
In the past, I have written my concerns about the old addage, “Be careful what you wish for.”
As a former commodities trader back in the day during out-of-control inflation, it’s news to me that supply/demand follows an orderly and linear model.
The way I see it, storms and drought are not only troublesome at the time of occurrence, they both can wreck serious havoc on raw materials in the not-so-distant future.
Interestingly, the latest Wells Fargo/Gallup Investor and Retirement Optimism Index hit 138 in September, its highest level in 17 years.
That means, like its statistical predecessor in the year 2000, folks believe the bull market has little chance of ending.
True or false, has the time come to slowly build a portfolio in commodities?
Let’s first review Monday’s analysis on IWM or the Russell 2000, the Granddaddy of the U.S. economy.
The week ending July 31st IWM made a high of 144.25.
Not only does that number match the top of the rising channel on the monthly chart, it sits as a beacon for either a new leg up or the possibility of a double top if it cannot clear.
Today, IWM posted a high of 144.02.
Furthermore, looking at the weakest sector-Granny Retail (XRT), critical support sits at 40.00. Below that level, a huge component of the GDP begins to suffer another blow.
Meanwhile, Transportation or IYT, filled the small gap at 173.38 from the low in July 18thand continued higher. Good for equities.
To further mix the pot, Semiconductors (SMH) failed to hold the runaway gap. In fact, SMH had a significant reversal pattern from the highs with better than average daily volume.
Add the above factors up and this is an anything-can-happen stock market scenario.
Soft commodities, on the other hand, look like they have very little risk to the downside with lots of upside potential.
Oil, getting a boost from the hurricanes, could be the beginning of the upward spiral.
Wood, the ETF, which I wrote about as a breakout when the price broke out above $52.00 gives us a clue. The demand for wood clearly outpaces the supply. Current trading price, $66.69.
DBA, the ETF for agricultural commodities, rallied well in spite of the Fed speak and the dollar gaining in price.
After a 7+ year decline, which one can argue really began in 2008, the time could be nigh for a rally.
If I were crowned market predator, as hawk or owl, I’d do exactly as the Fed did today. Appear calm above the surface, yet like Monday’s duck, disguise my frenetically paddling feet that try to keep me afloat.
L’Shana Tovah to our friends celebrating the New Year.
S&P 500 (SPY) Nothing particularly scary here, unless it fails 248.50
Russell 2000 (IWM) 144.25 big resistance. 143 pivotal support.
Dow (DIA) Runaway gap intact until 222.67 breaks down.
Nasdaq (QQQ) Came close to testing the 50 DMA. 146.59 the all-time high to clear if good
KRE (Regional Banks) Confirmed the recovery phase. 54.55 the 200 DMA to clear next
SMH (Semiconductors) 90.00 big support with 92.05 the resistance to clear for this to resume up
IYT (Transportation) It’s a bird, it’s a plane, it’s our flying Trans’ flying freight train. Huge, albeit, low volume rally
IBB (Biotechnology) Held 330 after all with 334 closest resistance
XRT (Retail) My thoughts here https://www.facebook.com/mishsmarketminute/videos/1896892637297980/
IYR (Real Estate) Held the 50 DMA
XLU (Utilities) Unconfirmed warning phase.
GLD (Gold Trust) Close to support around 122-123
SLV (Silver) 15.95 pretty key to hold if this is still good
GDX (Gold Miners) My fave of the metals at this point. Like this dip and looking to add
XME (S&P Metals and Mining) An example of commodities basing out
USO (US Oil Fund) Recovery Phase accelerating
XLE (Sel Energy Spdr Fd) Resistance at 67.00 key
OIH (Oil Service Holders) Through 25 should continue higher
TAN (Solar Energy) High volume reversal pattern confirmed unless clears 22.80
TLT (iShares 20+ Year Treasuries) Eked out a close over the 50-DMA
UUP (Dollar Bull) Let’s see what happens if it rallies to 24.20-28
FXI (China) No breakaway gap but still closed well
Disclosure: None.
Yellen helped the market and every asset class at the cost of killing the economy and encouraging terrible behaviors like business not investing in capital equipment and buying back their shares with debt, incurring debt, and tons of companies trying to buy property and rent it out while no one constructs housing. Why build when you can just own and raise prices. America is going to suffer everything the lost generation of Japan suffered.
She is right things would have been worse without QE and zirp. Things would have been worse for her and the rich and connected people in Washington DC. There will be no money left for the middle class, elderly, and young people as housing prices have risen extraordinarily, education prices have skyrocketed, and health care becomes even more unaffordable for people even the wealthy as incomes have not risen substantially for a decade.
Although I've never been much of a conspiracy theorist, I do believe that corporation lobbyists have intentionally fattened, drugged and dumbed down Americans. All while the wealthy continue to ascend.
As far as QE-Bernanke took that helm. Maybe I'm naïve, but I do think Janet Yellen has tried to deal with an impossible scenario the best she can. Meanwhile, the dystopian society you describe-well, I really hope is exaggerated. I hope! Thanks so much for your comments! Best to you.