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  • John Parmigiani

Here Comes The Fed !! Christmas In July ?? TBD ;-)

On Wednesday,  July 27, The FOMC meets to discuss Monetary Policy. The markets are looking GOOD … a little too good.


This is where we enter what I call “News Du Jour.” 


That’s right, “News  Du Jour” is the term I give to a piece of news that in reality has little significance but may be the catalyst and the “reason” a move in the market occurs.


People love to give a reason why something happened in the market, yet the market isn’t rational, in fact, it could be quite the opposite. Nevertheless, instead of trying to tell everyone they’re wrong, (which never works, because the market can stay irrational longer than WE can stay solvent) Let’s see what the market does and try to profit from it.


 So, There’s an old saying never short a dull market, and the market has been quite dull the last few two weeks. So we certainly don’t want to do that.


Now Let’s examine some recent events …The last time Yellen was supposed to speak about the effect of Brexit on Monetary Policy … she cancelled the meeting … Hmmmmm, very interesting.


Very.


Now, let’s review a little history, shall we?


Earlier in the year…. Inflation was rearing its ugly head and finally for the first time in 8 years the US raised interest rates…


While this was happening, the mere prospect of such started rallying the dollar because as interest rates rise the dollar becomes a more attractive investment.


Since Oil is priced in dollars, as the dollar increases in value, the price of oil declines and vice versa…


Hence, as the dollar climbed on rising in interest rates, the oil plunge gained speed from January into February.


I would speculate, even go on record saying that Oil bottomed on February 11th .


Now let’s fast forward to the next few FOMC meetings.


Holding rates steady…


Holding rates steady…


Potential raises later in the year….


Now keep in mind the rest of the world is in at least recession, adding more stimulus. Keep in mind, we are in global economy. In fact, earlier Tuesday morning forces in Britain said that they finally realize more stimulus was necessary.


So every other country is in need of stimulus, BUT the US is going to continue rocking???


Highly Unlikely.


June 21st, “WE DO HAVE LEGAL BASIS TO PURSUE NEGATIVE INTEREST RATES”, Janet Yellen


What?? Noooo? Really?  


Yes, she really said that…


A such, I’m speculating there is no interest rate hike insight for the next few years. The threat or dangle of such may be mentioned for years end; However the mention of such should be totally discounted.


Let’s not forget the horrible 38,000 non-farm payroll number for may report in June.


The market has been higher, so no one’s talking about it … YET!


Was it a fluke??? We’ll see.


I’d guess that on Wednesday the Fed gives a dovish tone based on international uncertainty and some good ole fashioned “News Du Jour” ;)


Now this is just an educated guess, and I could be dead wrong, so it’s important to wait for confirmation before entering a position, or trade, or even taking a stance on the market.


As such I’d take a wait and see approach going into the meeting. If I were a betting man, which

I’m not…I’d gander that that after the meeting Gold starts to resume its uptrend.


Gold broke a 5-year downtrend in January and I believe it could be back into the $1800’s within the next 18 to 24 months.


If this does play out, the dollar SHOULD (key word - should) weaken as well, and oil COULD (key word- could) find some support and start a move back into the high’s 40’s to low 50’s. Oil, however, may still be weighed down by demand FEAR’s …


Definition FEAR:  False Emotions Appearing Real.


As such, we are going to have to wait to see some positive action before we put positions on, depending on one’s risk tolerance.

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