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Wednesday, July 12, 2017

Daily update 7/12 Axel Merk: What's Next For The Dollar, Stocks, Bonds, & Gold?

Hawkish Yellen causes a buying panic.  By hawkish I mean insistence on balance sheet reduction.  No mater how you sugar coat it this is quantitative tightening.  At these low rates it might even have more of an effect then another rate hike.

SPX gapped up and headed somewhat higher.  Notice it stopped at the red resistance line from the last FED rate hike.  It hit that early in the day and could not stay above it.  Breadth was +70%.  New highs increased to 189.  New lows dropped way down to 16. 

The futures broke out above the 100 SMA, but are now at the upper channel line.  Will they be able to stay out there and keep pushing higher or fall back in?

I had to do a double take when I looked at this chart.  The green count actually fell today along with the red count.  That seems odd.  Still non committal on this chart.

I think what got the market excited was a comment by Yellen as follows:

"Because the neutral rate is currently quite low by historical standards, the federal funds rate would not have to rise all that much further to get to a neutral policy stance,"

That caused a drop in the Dec. rate hike odds and some short covering.  The bulk of today's move happened in the first 30 minutes.  Forward progress after that was really tough to come by.  The VIX closed at 10.30.  SPX has not made a new high and yet the VIX is already extremely low.  There may be enough juice left to make a new high, but I doubt we get much further.

Here are some thoughts from Axel Merk on what balance sheet reduction might mean for markets.
Axel Merk: What's Next For The Dollar, Stocks, Bonds, & Gold?


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