The Fed 50 bps cut and where to project the markets from here
So the Fed caved to the fears around the Coronavirus and cut rates by 50 bps this morning. Ed Moya, Senior Market Analyst at OANDA kicks off the discussion today about the rate cut. We address the Fed statement and market reactions so far today. This will be an ongoing discussion so stay tuned throughout the day.
Click here to visit the OANDA website and follow along with what Ed is writing.
This week’s move has not been impulsive. At least not from a daily (or larger) chart perspective.
Agreed Matthew. An impulsive move notes a trend change or continuation to a higher high or lower low, and can be looked at over different time horizons.
For example, if Silver was to take out the $21.23 surge high in the 2016 baby bull, then that would be an “impulsive” move to ahigher high. When Gold took out the $1377 level last year, that was also an impulsive wave higher.
So on a shorter duration daily chart and daily/intermediate cycle, if Gold or Silver could take out their most recent highs in a bullish trend higher, then it would be impulsive.
>> If GDX could take out the recent high at $31.84, making a higher high, then that would be impulsive.
What affect will this have on Forex?? Surely people liquidising their assets will skyrocket some of the currencies?
The mining ETFs have pulled back significantly from their highs but I’m still up 13%+, which seems like a good sign considering my highly speculative holdings.
I keep repeating Rick Ackerman’s words in my mind “Gold is in huge bull market but it will frustrate the heck out of everyone”
A bull’s objective is to buck everyone off, and buck it does!
Buck yeah!
The evil doers knocking back the miners so Trumps markets might still be appealing…Despite the interest rate reduction. They want Fed action to be in response to a virus rather than massive mismanagement.
Yes, the Gold bull market has been frustrating since it kicked off in late December 2015, so much so that after adding $600 that most are still wandering if Gold may just be in a bull market (lol). 😉
Most missed the moves the whole way up in the metals. More importantly, most investors missed every rally in the PMs — The 2016 surge through August of that year, the Q1 run in 2017, the Fall rally in 2017, the Q1 run of 2018, the fall rally of 2018, the Q1 run of 2019, and the Summer surge of 2019 into year end.
Now after an admittedly brutal last week, when miners got to wacky low levels again, few were buying on Friday. The last 2 days have produced nice recovery gains, and I’ve faded out of them yesterday and today, but it was an easy trade setup that most missed once again.
The bull throws off as many riders as it can as it climbs the wall of worry.
I’d anticipate some consolidation and up and down stagnation for a little while, but the macro economic picture with the FED cutting 50 basis points (like we mentioned they would likely do on Friday and the Weekend show) was not a surprise and they are trying to keep the markets from having another taper tantrum.
Other central banks are cutting rates, and this low to negative rate environment for as far as one can see (lower for longer) as the debt of nations keeps piling higher and higher is only underpinning the importance of precious metals.
Ever Upward!
I love the first sentence……………SPOT ON>>>>>>>EX.
People should look at the big cup that is forming….set back and relax…..
Northstar on Twitter shows that cup (bowl) formation in the HUI Gold bugs index, and puts last weeks corrective move into perspective for those that fear the end is near…
https://pbs.twimg.com/media/ER9RzQLWoAEn3AJ?format=png&name=900×900
Grab a cup o Joe, or a cup of tea, or a cup of brewsky…. It’s gonna be a great ride…
Even the gold chart……….shows a large cup forming….since 2011……there has been a lot of OVERHEAD resistance taken out……in the last few years…..people just do not see it..
they need to look at the big picture….This next wave is going to be HUGE….
With that said,……..expect the unexpected, which we got today in the RATE CUT…
Bang on Ex! Its certainly a race to bottom for the central banks in terms of interest rates.
The world is sailing into uncharted waters, as some banks have plumbed below “the bottom” all the way into negative interest rates. It’s a brave new world…. How low will it go?
Hit in my miners is concentrated in silver. There has been some long term issue with silver ever since JP Morgan took over that market.
Silver stinks…….right now………but, the ratio GSR,……at 95 to 1,….something is going to give…….this sucker is about to explode……jmo
Banks do not trust each other,…….The REPO rate was over subscribed , by the largest amount ever…..I posted the zerohedge article on another section.
Humm……….Jamie tells the boyz to work from home………
https://www.zerohedge.com/markets/project-kennedy-jpmorgan-tells-thousands-workers-work-home
Maybe, Jamie is getting ready to send out PINK SLIPS………… lol
Jamie, says he will just go and set in the silver vault…….spray the entire office building with the new Silver fogger….. He will invite ,all the elites to the office to hunker down, in their new silver fogged rooms, until the virus has been eradicated……. 🙂
Of course, they will need to bring in the gold they own first……just for safe keeping…of course……
OOTB you are on a roll today…
EX………..you are not doing to bad yourself tonight………I posted a note above…..
YOU WERE SPOT ON……….LOVE IT…..
CME, Comex, and CFTC ………..are all working in concert…….to screw every Tom, Dick and Harry…….in the paper market……The big deal for traders on Margin will be when the CME…….changes the rate on margin calls, ….with out you being given notice………as they just did last week……Caught everyone flat footed……..I posted the article last week.
It came from a GATA report.
IN the report……..CME, did the same thing in 2011,……4 or 5 times when the price of silver was going through the roof……..ending the parabolic move at $49 per oz.
THis is going to happen again…..for sure……depend on it…..The slim bags are not going to give up the silver………Jamie has it in the bag……or else he would be in JAIL>
OOTB
Don’t hold back about JP Morgan…Never mind. Tell us what you think!
I thought I should add a little more……since, your encouragement…..Plus I just needed to RANT ……. 🙂
Economically speaking, this whole knee jerk reaction to Covid-19 is over the top. Im not for minute underestimating its affect on the global economy as it slows down the second largest economy in the world and of course the flow-on affect throughout this globalised world. But one really needs to take stock here and look at the long term ramifications of such decisions by the Fed. Not since 2008 has there been a rate cut implemented during an intermeeting phase. Nor has there been more than a 25 basis points cut since the GFC fall-out. And all for what??? The possibility of what may occur in the future? Please, the Fed (and world central banks over for that matter) have forever been behind the curve in their analysis and planning and now they have over compensated the other way. Plus all this against the backdrop of an economy that was supposedly the most robust and sound at present… Nup, I dont buy it!
Lets not forget in terms of rate cuts, the Fed is low on ammo. So to use up that option on hypotheticals and possibilities seems somewhat negligent in their responsibility to oversee and steer a whole countries economic outlook. What happens when the brown stuff really hits the fan and the world over faces a fresh economic downturn of significant proportions? Do we just go into negative territory regarding interest rates? Does monetary and fiscal stimulus alike venture into unseen levels? QE4, 5, 6, 7 etc, etc, bailouts, direct stimuls handouts to the public, balance sheet blowouts at both cebtral bank and government level? At what price do our so called “esteemed leaders” go to in order to correct this monumentally fraudgelent, corrupt and greedy system that dictates much of our lives? What will be the end result of an ever elusive attempt to restore the status quo and can kicking?
Or am I looking at this in the wrong perspective? Is this whole coronavirus dilemma a game changing event that over time will be labelled as the beginning of the end for the current system? Perhaps a sequence of events will transpire out of this pandemic that allows the powers that be an excuse to wriggle their way out of an economic corner where there is no accountability? Write off debt, declare bankruptcy, purposely crash the system in an attempt to deflect attention away from those that are culpbable and complicit in the whole ponzi scheme and then dress them up as saviours when they hatch a so called “solution” to all our problems.
Of course we all know, governments, central banks, corporations and the like are all privy to knowledge and info well before the public. Maybe this is the start of a self sabotage scenario so the aformentioned hypothetical will unfold before our eyes? It just all seems so well scripted and dramatic, especially when this coronavirus problem didnt even exist as 2019 drew to a close. The masses havent helped the whole situation with their hysterical response in some quarters either. Here in Aus toilet paper, soaps and hand santisers have been bought in bulk to such a level where entire shops are empty and are ordering above average supplies in anticipation of further stockpiling. Even online stores are running out of hand sanitisers. I heard of one lady paying $50 for a run-of-the-mill 200ml hand sanatiser! This behaviour is just ludicrous… Not too dissimilar to what we actually witnessed in global markets last week.
Just for some global perspective here: Never before have I lived in a period in Australia where there has been a constant narrative banded around about our economy that contains buzz-words and phrases such as: negative rates, negative growth, stimulus injections both monetary and fiscal, ballooning private debt, impossible budget surplus, sustainable debt because of low rates etc, etc. The list goes on. The global economic outlook looks increasingly vulnerable to a major crash. Its just a matter of when?
Incredibly well-stated Ozibatla. The FED has always been behind the curve…..
In this case, they are are throwing everyone a curve ball by cutting 50 points and using one of their biggest tools just in case things happen in the future, to try and stave off the general markets inevitable fall from grace. They are pulling out the big guns now and the real challenges haven’t even started yet.
We live in interesting times.
I don’t believe for minute that stocks weren’t going to fall anyway, virus or no virus. The fundamentals have deteriorated significantly since the markets corrected sharply 2 years ago and stock market technicals had become nearly as extended as they were back then. The “authorities” always need a story to explain away what would have happened anyway and the masses always fall for it.
The economy has been in much worse shape than reported for a long time and stocks quit rising in real (gold) terms 18 months ago because of it.
This is the resumption of the secular stock bear that began 20 years ago when the Dow peaked at nearly 45 ounces of gold. (By 2011, it had fallen to about 6 ounces so a huge relief rally began and took it to all the way to 22 ounces by mid 2018. That was a real bull market since the more than tripled in real terms. Now it is 15.76 ounces and sitting on an important support in the form of a pitchfork that is based on the Dow:Gold 1980 low, 2001 high and 2011 low. Dow:Gold is also just .15 above its 30 quarter MA and was below it briefly today for the first time since 2013. It’s been one giant abc correction since 2001 and the “c” wave has begun and could last many years.)
The Fed can cause stocks to rise versus the dollar if it is motivated but it will not be able to stop stocks from falling versus gold. Of course there will be countertrend moves lasting days, weeks or even months but the trend for Dow:Gold will remain down.
Quarterly Dow:Gold if you can see it:
https://stockcharts.com/h-sc/ui?s=%24INDU%3A%24GOLD&p=Q&yr=50&mn=6&dy=0&id=p99135442688&a=724703065
Too right David!
What about JPM’s massive paper shorts on PM’s? Looks like Powell just roasted their goose—
Hmm, maybe hedge funds & paper longs could simply choose to take delivery. Of course, the cheaper the price, the better…
Time to start chipping away at that $22 trillion–
OK. So I’m starting to catch up to Melania. In what language? (That’s a tall Meloncamp order).
It may have even become a Mellencamp order…
https://images.search.yahoo.com/yhs/search;_ylt=AwrEZ7aCH19e6G4AIQAPxQt.;_ylu=X3oDMTByMjB0aG5zBGNvbG8DYmYxBHBvcwMxBHZ0aWQDBHNlYwNzYw–
That is interesting Matthew. I guess your main assertion here is that fundamentally gold is a true and inherent measure of wealth, whereas markets and fiat currency used within them are fictitious? For what its worth, I agree wholeheartedly.
Also I think that markets (Dow, S&P, ASX, etc) ultimately represent Wall St, not Main St and are therefore not a true reflection of a countrys underlying economic strength. Basically the facade that is an overinflated market within a country is able to mask financial problems throughout society for a period of time. However eventually the chickens will come home to roost.
Hypothetically speaking, if were to face some sort of global reset in the future and gold became a partial benchmark of wealth and subsequently its unit price was severely revised upward, would other PMs automatically follow suit in their direct relationship or would they be left in the wake with all other assets?
There is definitely a lot of “smoke and mirrors” in the markets but they do roughly reflect the underlying economy. The problem is that both the markets and the economy aren’t measured in honest money so the masses confuse nominal new highs for real new highs. How many people know or would accept that the Dow is currently just one-third the value of its peak 20 years ago?
Gold, not the CPI, is the best way to measure the health of any currency since gold is the money that currencies have replaced and is the best money in history. Just think, the mile would now be around 100 feet had it been pegged to the Federal Reserve Note over the last century and a pound would be around a quarter of an ounce. No currency is an honest weight or MEASURE of anything.
In a global reset, I think only silver would benefit along with gold and to a similar degree since the other PMs are not monetary metals at all.
Matthew,
What are your thoughts on the possibility of gold and/or silver confiscation?
The odds seem slim to me but I’d be concerned about new taxes like a VAT or wealth tax.
This isn’t the 1930s so maybe a lot more people will finally figure out the real problem.
The following photo perfectly captures the relationship between the people and the government…
http://www.thepartyissober.com/wp-content/uploads/2018/04/horsechair.png
Ha, ha…………good one……….picture worth a thousand words……
Cheers Ex. I just cannot believe this knee-jerk reaction. Reserve bank of Australia also dropped our official rate by 25 basis points yesterday, as if to further emphasise the race to the bottom. Here in Aus we now only sit .50% above 0. That is slightly scary. I am now of the firm belief that I will see negative rates for a period in Australia. Looks as though Trump wants the same in America all in the name of competitive trade conditions. A simple oversight by a man whose business background initiates a lust for profit and acquisition perhaps?
Let the race to the bottom, and then below the bottom into negative rates begin….
(oh, it looks like it already has…. 🙂 ) Cheers and genuine fears for the future!
All BANKSTERS are on the same sheet of music….
Yes anything that is backed by a promise from someone who is nothing other than a puppet and talking head to a hidden agenda should certainly be taken with a pinch of salt.
The Fed should just drop rates into negative territory so we can get another 4 hour run out of the miners.
Good one David! 🙂
PM spike can be characterized as an impulse move? I’m not sure about the longevity. I sold all leveraged positions but keeping core investments (Barrick, AG, PAAS, VGZ)