Breaking News
Get 40% Off 0
👀 Reveal Warren Buffett's stock picks that are beating the S&P 500 by +174.3% Get 40% Off

Post Yellen = Confusion

By Dan NorciniMarket OverviewAug 29, 2016 12:39AM ET
www.investing.com/analysis/post-yellen-=-confusion-200150446
Post Yellen = Confusion
By Dan Norcini   |  Aug 29, 2016 12:39AM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items
 
 
XAU/USD
+0.36%
Add to/Remove from Watchlist
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio
 
XAG/USD
+0.09%
Add to/Remove from Watchlist
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio
 
EEM
0.00%
Add to/Remove from Watchlist
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio
 
Gold
+0.26%
Add to/Remove from Watchlist
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio
 
Silver
+0.07%
Add to/Remove from Watchlist
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio
 
GLD
+0.51%
Add to/Remove from Watchlist
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio
 

Yellen seems to me to be mastering the art of saying things so that everyone can come away hearing what they wanted to hear.

For those concerned about the Fed leaving interest rates too low for too long, she adopted a hawkish view on the economy, particularly when it comes to the payrolls. For those thinking that any Fed rate hike would send the Dollar soaring, pressuring Emerging Markets as well as equity markets both here domestically and elsewhere, she sounded the theme of interest rates remaining low for a long time. Thus, if the Fed were to hike sooner rather than later, no need to worry because it would not signal the beginning of a rapid series of rate hikes.

Initially, everyone seemed happy – Utility stocks moved higher but so did banking stocks/financials. By the end of the day, the utility sector had sold off and banks faded somewhat. Emerging Markets which initially were more than happy, then faded sharply before the closing bell rang.

The dollar, which had initially moved higher moments after the speech, then reversed and sold off, managed to reverse its reversal and ended higher on the day.

US Dollar Index Daily Chart
US Dollar Index Daily Chart

So far the 94 level in the USDX seems pretty solid. Now we need to see if we are going to get more upside. The next level that offers some minor resistance is near 96 and then again at 96.50. Stronger resistance is up near 97.00-97.25.

The same sort of confusion that gripped most major markets was seen in the gold market which was all over the place yesterday ( Friday).

Look at this hourly chart of gold.. talk about whipsawing back and forth! You had a $25 range within the span of an hour before the market finally succumbed to the move higher in the US Dollar. Look at the volume spike – an awful lot of people got hurt going either direction on Friday.

Gold Continuous Hourly Chart
Gold Continuous Hourly Chart

On the daily chart, the market still remains locked within the broad trading range that has held it since last June.

Gold Daily Chart
Gold Daily Chart

Short term charts are bearish at this time however. The big test for gold will be whether or not it can hold down at the July lows near $1312-$1313.

The Heikin Ashi format is still in sell mode as well with this particular style chart showing a second close below the 50 day moving average.

Gold Daily Chart II
Gold Daily Chart II

The ADX line is falling indicating that range trade with the -DMI above the +DMI indicating that the bears have short term control within the context of a range bound market.

As far as this week’s COT chart goes, we had a bit of movement but nothing of serious note. HOwever, it needs to be kept in mind that the day after the Tuesday cutoff, gold plunged $20 and ended on a weak note to close out this week.

Gold COT Chart
Gold COT Chart

That hedge fund net long position still is looming over this market and if that bottom of the range near $1311-$1312 gives way, you will see some pretty heavy long liquidation by that group as the technicals are turning soft and they will not stick around for long if that continues.

Hedge Funds
Hedge Funds

Of more concern to me is that the Swap Dealers, the group of traders with the overall best record for nailing tops and/or bottoms in the gold market, are still very, very short and still not far off from their recent all-time high short position in the metal.

Gold Market
Gold Market

The HUI remains unable to climb back into the GAP region created on Wednesday this week. It is holding the 100 day so the bulls can take some consolation in that but you can see the significance of the level near 235 on the chart. If that gives way, gold and silver are both heading lower.

HUI Daily Chart
HUI Daily Chart

For the bulls to gain a further glimmer of hope in there, at the very least they need to close that GAP.

The gold ETF, GLD (NYSE:GLD), is at least holding relatively steady as far as its reported gold holdings go.

GLD Chart
GLD Chart

Taking a brief look at silver…. we are indeed seeing some long side liquidation by the hedge funds with that lopsided position of theirs finally succumbing to reality.

Silver COT chart
Silver COT chart

In all honesty, I have been expecting more long liquidation from that group than we are currently seeing.

Hedge Fund Positions In Silver
Hedge Fund Positions In Silver

Interesting however is that the hedge funds have added about 8000 new short positions since the middle of July. Only 6000 longs have been liquidated since peaking early this month. They may not be coming off of their longs all that much but there is some movement towards the short side in a small way.

Silver 4 Hourly Chart
Silver 4 Hourly Chart
Silver Daily Chart
Silver Daily Chart

Both charts have a heavy look to them at the moment. Last week’s low near 18.43 needs to hold or silver will more than likely fall to the 100 day moving average. That will be a big, big deal if that level gives way because that will usher in a wholesale round of hedge fund long liquidation. That level happens to be very close to psychological support at the $18.00 level.

Bulls need to take price back through $19.30 on the topside to shift the current negative chart pattern somewhat.

Lastly, a short note on the Emerging Markets.

EEM Daily Chart
EEM Daily Chart

I recently noted their strong performance but also noted that this ETF is basically a play on whether or not one thinks the Fed is going to raise rates. Within the last week iShares MSCI Emerging Markets (NYSE:EEM) have weakened considerably so much so that the chart pattern is deteriorating in the short term. I am keeping a close eye on this particular ETF because a huge sum of money had been allocated to Emerging Markets since June. All of that money went into there because the odds that the Fed was going to move on rates was extremely low. That in turn kept the US dollar from advancing. If the Dollar starts to turn higher and if it looks like that is a trend we will see a significant amount of this hot money come out of this ETF and Emerging Markets in general.

The flip side to this particular ETF, “EEM”, is the inverse ETF, namely “ProShares Short MSCI Emerging Markets (NYSE:EUM)”.

EUM Daily Chart
EUM Daily Chart

This one just flashed a buy signal this week with the close above both the 10 day and 20 day moving averages constructive in the near term.

The reason for this is that the Fed Funds futures are showing a bit higher probability of a rate increase coming in September. Prior to Yellen’s speech, odds of a rate hike in September were 21%. After the speech the odds rose to 33%. Not much, but definitely higher. That is why the Emerging Markets weakened.

Post Yellen = Confusion
 

Related Articles

Octa
Gold Surges Above 2,040; Bitcoin Corrects By Octa - Mar 01, 2024

Gold Surges Above 2,040 as US Dollar Declines After the PCE Report The gold (XAU) price increased by 0.42% on Thursday as the US dollar weakened after US inflation data aligned...

Post Yellen = Confusion

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with other users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind:  

  •            Enrich the conversation, don’t trash it.

  •           Stay focused and on track. Only post material that’s relevant to the topic being discussed. 

  •           Be respectful. Even negative opinions can be framed positively and diplomatically. Avoid profanity, slander or personal attacks directed at an author or another user. Racism, sexism and other forms of discrimination will not be tolerated.

  • Use standard writing style. Include punctuation and upper and lower cases. Comments that are written in all caps and contain excessive use of symbols will be removed.
  • NOTE: Spam and/or promotional messages and comments containing links will be removed. Phone numbers, email addresses, links to personal or business websites, Skype/Telegram/WhatsApp etc. addresses (including links to groups) will also be removed; self-promotional material or business-related solicitations or PR (ie, contact me for signals/advice etc.), and/or any other comment that contains personal contact specifcs or advertising will be removed as well. In addition, any of the above-mentioned violations may result in suspension of your account.
  • Doxxing. We do not allow any sharing of private or personal contact or other information about any individual or organization. This will result in immediate suspension of the commentor and his or her account.
  • Don’t monopolize the conversation. We appreciate passion and conviction, but we also strongly believe in giving everyone a chance to air their point of view. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.
  • Any comment you publish, together with your investing.com profile, will be public on investing.com and may be indexed and available through third party search engines, such as Google.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Continue with Google
or
Sign up with Email