Today is Fed announcement day. The market has opened up, but I would expect mainly flat performance until the Fed announces the outcome of their July/August meeting. I maintain the belief that the market run is failing and that we will retest the June swing point, closing the gap at or below $130 price level on the SPY.
I continue to believe that Fed WILL pursue further quantitative easing programs in the future. However, it is unlikely that the future is today. Monetary supply continues to show growth while market performance remains in the positive territory on a year-over-year basis, suggesting no to little change in monetary stimulus actions. Employment, which has been a key flash point to investors, as it is a part of the Fed's dual mandate, continues to gain. Albeit painfully slow. We find it unlikely that the Fed will move until slowing growth becomes outright declines in monetary supply, the market and employment. Add to this is the uncertainty created with rising food and energy prices, which are likely to add to inflation later in the year.the prospect of higher inflation may force the Fed into a wait-and-see attitude.
One last note on gauging the likelihood of an expansion of monetary stimulus, the precious metals and precious metal stocks- investments sensitive to changes in monetary supply and interest rates- are getting hammered in A.M. trading. The Phily Gold/Silver Index (ticker XAU) is down more than 2% while the market Vectors Gold Miner ETF (ticker GDX) is down about 3%. See the charts below.
The GDX's decline is on particularly heavy volume. Either the operators are acting to get in ahead of a monetary action by the Fed or investors are getting out ahead of no action. I think you know what I think.
I continue to believe that Fed WILL pursue further quantitative easing programs in the future. However, it is unlikely that the future is today. Monetary supply continues to show growth while market performance remains in the positive territory on a year-over-year basis, suggesting no to little change in monetary stimulus actions. Employment, which has been a key flash point to investors, as it is a part of the Fed's dual mandate, continues to gain. Albeit painfully slow. We find it unlikely that the Fed will move until slowing growth becomes outright declines in monetary supply, the market and employment. Add to this is the uncertainty created with rising food and energy prices, which are likely to add to inflation later in the year.the prospect of higher inflation may force the Fed into a wait-and-see attitude.
One last note on gauging the likelihood of an expansion of monetary stimulus, the precious metals and precious metal stocks- investments sensitive to changes in monetary supply and interest rates- are getting hammered in A.M. trading. The Phily Gold/Silver Index (ticker XAU) is down more than 2% while the market Vectors Gold Miner ETF (ticker GDX) is down about 3%. See the charts below.
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