SD Outlook: The Fed and the cartel may be busy in the kitchen doing their prep work all week long. Here’s why…
Now that everybody is back for a full week of market action, the Fed will attempt to make it crystal clear just who is in charge.
As such, we’ve got Fed Heads galore coming in strides all week long, starting with a buy one get one free today:
Rounding out the latter half of the week we have afternoon speeches:
This makes sense from the Fed’s point-of-view, because the most significant data releases are scheduled for Thursday and Friday mornings, so the Fed will be able to clarify or massage an explanation of one of the data releases, such as the Producer Price Index (the cost that producers pay for raw materials), the Consumer Price Index (the price us consumers pay for finished goods and services) and Retail Sales (how awesome all the retailers are doing selling us all stuff we don’t need with credit we can’t afford) of for some reason the “markets” don’t like what they see in the numbers.
The thing about the events calendar this week is that it is commonplace to have this amount of Fed activity because it is simply part of their “jawboning” of the markets.
On the other hand, when the Fed has their FOMC meetings, or when the Fed Chair is giving (soon to be his) Humphrey Hawkins congressional Q&A
show session, they don’t send out a barrage of central bankers to talk the markets because the data releases do it for them. A full slot of Fed speeches, like this week, fills the gaps between major market moving data releases.
The markets are so delicate that not one hour can go by without ESF and Fed direct intervention.
Last Friday the charts were setting up to show that a pullback could be imminent, and it appears this is still the case, though putting things into perspective, it is looking less like we will be getting a natural pull-back and more like we’ll be getting some good old-fashioned strong arming.
If the Yuan based crude oil futures contracts is indeed going to launch next week, the cartel is going to need to stay on top of their game this week in case there are swift and notable moves in gold & silver.
So with silver, we can see that whole number support is nearly where the 200-day moving average can be found:
While I took a lot of heat on Friday for saying we could see a pullback here, it is still looking that way on the charts. Let’s hope silver can stay above the 200-day. Regardless, if silver does nothing this week but consolidate, that could suffice for our pullback because it would be consolidation over time. Said differently, price is not the only thing that can re-balance the market by shaking out long traders and bring new ones in, but time can do it as well.
What we don’t want to see is a long, drawn out sideways consolidation because right now we do have momentum on our side as well as better sentiment.
Note on the chart above that for the first half of 2017, there was very little sideways consolidation until early October, which coincides with terrible sentiment and agony for anybody rooting for the white metal.
Gold has held up better than silver on the chart:
Granted, it wouldn’t be fun pulling back $20, but that’s where both whole number and technical support happen to be.
The good news is that support is still $20 higher than where the 50-day moving average is.
The GSR highlights the last few days of a whole bunch of nothing:
In fact, the gold to silver ratio continues to ride the 50-day, and it appears to be riding it in a manner similar to the August to September time-frame, which recall is when gold and silver made their run to their highs of 2017. Let’s hope for a similar move again.
Platinum shows the nice move from mid-December:
Which brings up a point that may not have been made last Friday:
It’s not just me that would say the metals are “overbought”.
Many traders go off of the same technical indicators, or combination of indicators, so anybody who would look at that chart, without knowing what the underlying was, would say that it’s overbought and due for a pullback.
Palladium is hanging in there:
But the technical indicators are showing the same signs.
Those indicators could turn neutral if we get sideways consolidation from here, but as has been the case with palladium for the last year, it is not unreasonalble to say that palladium could be taking a trip back down to the 50-day moving average. You can count at least seven times over the last year when it has done just that.
Copper has some support which is above the 50-day moving average:
And Crude is has been on it’s most recent run for as long as the metals have:
The dollar looks like it’s ready to bounce today:
That last candlestick is the action overnight and into this morning.
If we are staring down either a pull-back or a consolidation in the metals, this is what we would expect to see with the dollar.
Granted, volatility is still non-existent with the VIX looking to open below 10 again:
And as we have been tracking, the yield on the 10-year looks to have found a new range between 2.4% and 2.5%:
Looks like we could be at Dow 26,000 by the end of the week:
Which if the Fed is selling volatility and buying the indexes, Dow 26,000 would be expected.
So what’s the overall theme of this week? Don’t let your guard down.
The cartel will want to do everything they can to force either a pullback or force a sideways consolidation.
Next week is both a short week (Martin Luther King Jr. Day) and possibly the start of the Shanghai Chinese yuan denominated oil futures contract, so the cartel will do everything in their power including working overtime this week to complete as much prep work of the markets as they can.
– Half Dollar