A Paralyzed Fed Defers Decision On Monetary Policy To Primary Dealers In An Act That Can Only Be Classified As Treason

 

Goldman: "The Dollar Needs To Fall A Lot Further From Here"

 

Guest Post: The Tipping Point has Arrived

 

Hourly Action In Gold From Trader Dan

Posted: Oct 28 2010     By: Dan Norcini      Post Edited: October 28, 2010 at 1:57 pm
Filed under: Trader Dan Norcini

Dear CIGAs,
If yesterday was “the Fed is going to take our expected punch bowl away from us” day, today was, “the Fed is going to not only bring the punch bowl, but spike it with white lightning”. Word from a Bloomberg story that the Fed is consulting with the primary dealers was enough to dispel the doubts from yesterday. “She loves me; she loves me not; she loves me; she loves me not”. And thus the waiting game goes on….
Seriously, the markets are moving back and forth based on the changing expectations and psyche of the speculative trading community. Expect this to continue until we get more definitive amounts when the FOMC makes it announcement next week. The phrase of this week, and until then, is “range trade”.
Gold bounced from $1320 on the bottom of the range and is running towards $1,350 at the top of the range. To repeat myself ad infinitum, ad nauseum, a break out of this range on decent volume that closes either above $1,350 or below $1,320 on two consecutive trading days, will give us the direction of the next trend. The reason – The Dollar will either rise or fall depending on that announcement next week. Make no mistake – QE is coming. The only question is the amount and the timing.
The Dollar was of course beaten with an ugly stick today as the giddiness surrounding the Bloomberg story motivated Forex traders to unload on it. That it has fallen so sharply is evidence of the dangers inherent in the Fed’s policy. As I said yesterday, the Fed can either save the Dollar or the stock market; they cannot do both.
The HUI bounced off the bottom of its range, following the metals, and moved back towards 520. Until it takes that out and follows through, it will be trapped in a consolidation mode.
Wheat is slowly grinding higher on dryness fears in the winter wheat growing areas here in the US. The entire grain complex continues to experience supply concerns which is working to push food prices inexorably higher, notwithstanding the load of BS being dished out by the official government agencies that tell us food inflation is tame. I guess they think that we are too damn dumb to believe our own eyes. Corn is slowly closing in on the $6.00 mark while wheat is back above $7.00. Soybeans are over $12.
If that were not enough, Sugar is now up near $0.30 pound, an incredible price. Coffee, while weaker today, is at levels last seen in September 1997! Nope – no rising food costs anywhere in sight….
Once again the saving grace for the beleaguered consumer is the energy sector, especially natural gas, which is mired in an oversupply glut that has kept it subdued for some time now. Crude oil also cannot seem to get much going as it struggles with the region near $83 – $84. Until it can push past there, consumers will be able to enjoy relatively cheaper energy costs even as they dig deeper into their wallets for grocery money.
Bonds remain rather lackluster. They are however perched rather precariously above an important chart support level near 129 ^10. If they are going to bounce and move back within the rather broad range they have carved out over the last two months, they had better do so quickly or we could see them drop towards 126. At some point the multi decade bull market in bonds is going to come to a rather inglorious end but I am not ready to make that call just yet; not with the probability of massive Fed buying of Treasuries waiting in the wings. At least they are buying them because if the Dollar drops through 77 and especially 76, no one else is going to want them.
Until we get past next week’s FOMC announcement and the upcoming election, there really isn’t a whole lot more worth saying.
Click chart to enlarge today’s hourly action in Gold in PDF format with commentary from Trader Dan Norcini

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