The media now sees that QE is off the table for at least the year; however, they failed to make the point that QE is failing. Numbers have been coming out poor for the US and are flat to poor around the globe. US Republicans acquiescing to an extension of the debt ceiling so that they can keep negotiations going proved to me that this “so- called crisis” was all a show very much similar to the Fed’s bluffing about tapering this year or at all. Just how long the Governments and Central Bankers can keep the markets guessing is still hard to see. As for me, I am now ever so more convinced that the Fed is stuck in QE. I think also that markets are slowly but surely coming to this very same conclusion. Just think of the implications of the US defaulting if the Debt ceiling is not raised. That is an admission that the US is not willing to pay off its debt by revenues. It is not different from telling Visa that if you don’t lend me more money to pay back some of my debt and some extra to buy some needed things, I am not going to pay at all. Fortunately there is no worry because the rest of the world wants them to do just that and they are ready to prop up the buck by printing. If you really think about it, the buck should go south given the cave in by the Republicans and the nomination of Janet Yellen, an abject left wing Keynesian bent on the premises that wealth and job creation can be accomplished by the press. Gold should be up and the buck down off that one, but they are not. The pundits will have you think that all this good news is good for the buck. But I don’t think that is really the reason. Most would have you think that default would be curtains for the USD. It wouldn’t. If the US defaulted, interest rates would soar and the economy would go into a massive restructuring leaving those holding Dollars in the drivers seat. Take note, though, that with the clear message sent out this week of the Republicans capitulation and Yellen’s nomination, the USD has held out and looks strong technically on charts. This can only mean one thing. Deflation is gaining momentum and gold is telling us so.
Regardless of the political haggling, Stocks rebounded nicely this week hitting lows to complete retracement waves: the Dow bottomed at 14719 and the S&P at 1646 on Wednesday 9th. The move up on both charts carved out nice impulses to close Friday at Dow 15237 and S&P 1702.
The US Ten Year Yield has already traced out a nice three-wave move for a B wave correction off of the October 3rd bottom it hit at 2.58. If you notice, the bounce did not make it to the 38.2% retracement of the A move down off the Sept 5th high minute wave three. Even though this move can turn into a complex structure reaching for a higher B point, I have it counted as done for now because of the nice text book Zigzag completion and the impulsive like move down on the 15 minute to 2.68% so far.
Gold and silver were both down on the week refusing to break above key trend line support and jerking rallies. Gold actually made a new low at 1261 below the Oct 1st 1277 low. Silver made a low at 20.59 on Oct 1st also but failed this week to do so on its downward move stopping short at 21.39. If silver breaks this divergence next week, it could send the dollar soaring. Even though I am bearish and am counting these choppy moves as 1, 2 series, I am keeping a watch for the metals to maybe make one more push up for a complex correction extension up; there is more room without having to invalidate counts at larger degree. Plus with Goldman’s sell call along with the Republican’s giving in and then someone dumping 2 million ounces of Gold on a market sell order, Gold and Silver might keep correcting and make some new highs to complete the 4th or B waves at minor degree. Sounds like they are trying to push down the price in order to pick it up again. However, I don’t think the metals will move up that much before they continue falling.
The buck is already up against the Pound and the Yen. The EUR held up pretty well against the buck but failed to rally enough to invalidate the top it put in so far. The moves in the bucks favor are impulsive while the pull backs are corrective. There is no doubt that money is piling into the buck and the contrarian media is telling me so. When you see critical EW levels being hit and holding with confirming moves in the opposite direction, technicians must obey. On the smaller fractals the buck has been moving impulsively since the beginning of the month in spite of the dooms day scenarios most fundamental analysts were calling for. Even the Commodity dollars have failed to take out these corrective tops they put in last month although they have been holding out sideways for a bit now. And regardless of the good news out of Canada this week and the nice move against the buck on Friday, the USDCAD is still making higher highs and higher lows on the bigger fractals. And to top things off, although the Japanese officials have been talking down the currency, the Buck moved up nicely against it along with all the Yen Crosses. The USD Index had been moving impulsively since the 80.36 bottom. It hit 80.41 this week and has pulled back a bit to close Friday at 80.24.
his month has been a very interesting month to say the least. Good luck and Happy trading.