January 28, 2016
With continued uncertainty in global markets, today two legends in the business sent King World News powerful pieces about the banking crisis in Europe and a major buy signal in the gold market.
[b][b][size=18]January 28 (King World News) – [/b]Jeff Saut, Chief Investment Strategist at Raymond James: [/b][/size]“A word means what I choose it to mean” is a close facsimile of the aforementioned quote. I was reminded of it as I read yesterday’s FOMC statement for there were a few phrases that stood out.
Our economist Scott Brown, Ph.D. writes, “Note that the FOMC also added one new line to its statement on longer-term goals and monetary policy strategy: The committee reaffirmed its 2% inflation objective, adding ‘The Committee would be concerned if inflation were running persistently above or below this objective.’ Persistently low inflation apparently is a concern for some officials.”
Scott also writes, “No change in rates, as expected. The FOMC recognizes that U.S. economic growth has slowed, while the labor market has continued to tighten. Both market and survey-based measures of inflation expectations have declined. The FOMC continues to expect ‘gradual’ policy adjustments (rate hikes), and is keeping a close eye on global economic and financial market developments. This seems a lot like what we saw in September (when the FOMC delayed raising rates).”
And that, ladies and gentlemen, is what caught my eye. The actual Fed quote yesterday was, “The Committee is closely monitoring global economic and financial developments and is assessing their implications for the labor market and inflation, and for the balance of risks to the outlook.” While that quip was included in the Fed’s September statement, it was missing in October and December. Maybe events like the Paris tragedies, ISIS, China, the Saudi/Iran tensions, North Korea, et al really do play role in what the Federal Reserve decides to do with interest rates.
A Selling Stampede In Stocks
“A word means what I choose it to mean” and evidently Mr. Market didn’t like the Fed’s meaning of words yesterday because the Dow Jones Industrial (INDU/15944.46) went from ~16224 at 2:00 p.m. to 15935 by 3:00 p.m. And that is why, ever since the Industrials broke below their December low on January 6th, we have said the equity markets are likely in a “selling stampede” that will take 17 – 25 sessions before it is over.
It is also why when you get into one of these downside skeins you do not try and catch a “falling knife.” Many have tried to make such a “call” and have had their finger cut off. Even last Tuesday’s 90% Upside Day proved to be a head fake, as was January 13th’s 90% Downside Day.
A Major Buy Signal In The Gold Market
I will say that gold has broken out to the upside in the charts and has turned my proprietary “trend change” indicator green; and green is good. This morning futures are flat as session 21 begins with the rain pounding on my steel roof.”
Art Cashin Warns About European Banks
A portion of today’s note from Art Cashin: “Overnight And Overseas – U.S. futures give up solid overnight gains as the concern over European banks (spelled Italy) continues to grow. Europe is solidly in the red led by the financials.
In Asia, Shanghai got whacked again as did Tokyo. Hong Kong clawed its way to unchanged.
Oil has a decent bid as does gold. Copper and grains are weaker.
Consensus – Bond market puts the chance of a March hike at 0.16%, half of what it was before FOMC statement.
U.S. futures have regained a mild bid thanks to firmer crude. European banks are moving back toward center stage. Volatility will likely stay high. Stay wary, alert and very, very nimble.”