Earlier today I was asked why I wasn’t aggressive at the $1,182 level. The short answer: I have no faith in the Fed. The market was vulnerable to any nonsense spewed by the Fed, particularly a hawkish tone, which would have accelerated the pull-back and possibly damaged the support line. So, Yellen in her ultimate wisdom waffled.
The bullish leg up to $1,192 came as Yellen indicated concerns about weak oil and global financial issues. Then, in her next breath she said this was all transitory and the Fed’s inflation target of 2% would be met sooner rather than later.
The result was an immediate sell-off back to $1,182 support. When it was all over it became clear that the Chair had no clue as to future monetary policy and it is likely to be re-active as opposed to pro-active.
What does the word transitory mean to the Fed? Oil has been on a decline for well over a year. It is like the gold bulls of 1992 who indicated gold’s weakness was temporary. OK, if you consider 10 years temporary, they were right. The Fed has lost control and both the equity and oil markets seem destined for further erosion. I gave up a bit of juice by waiting for a close above $1192, but I now have more conviction that the uptrend has legs with gold prices trading back above the $1,200 handle during the Asian trading session.
