The FED HIKED-Duh-Now What?

So, the Fed hiked. Everyone knew that was coming. What people did not know was that they have upped their projection to three hikes next year instead of two. That was the surprise. Let’s look at what happened when the Fed raised their projection from two or three…

spy

…tapped the top end of the channel range and pulled back. I was a little early last Thursday; however, it seems that the market wants to pull in and measure this out, at least for the next few days and see where some buyers are. I am looking at the bottom end of the range near 220-221 to be looking for the first spot. Do not chase up here. As you can see, today the banks began selling off and moving in and they will be the strongest when the market resumes higher.

Now for Dollar

As I said here this is what will matter. The dollar. 

The Dollar ripped up today over 1.0%. What happens next is very important.

The dollar ripped up today over 1.0%. What happens next is very important.

The dollar has closed above the .618 retracement from the highs to lows of the last cycle. Bulls 1, Bears 0.

The dollar has held the level that was twice prior resistance. Bulls 2, Bears 0.

The Fed is hiking rates. Bulls 2, Bears 0. (Rates increase the currency compare to other countries whose rates are lower however it slows inflation, which is important here)

dxy

Now, what I have not mentioned is as the dollar gets stronger, companies earnings are likely to decrease. In my opinion, this is due to over half of the revenue coming from other countries and the fact that America is not quite “strong” yet. Many are still feeling the effects of the economic collapse.

All of the present data points show the dollar’s growth accelerating and breaking out to new highs. Consensus says gold is going to 0, bonds are going to 0, dollar is going to 120 and Dow to 40,000 under Trump.

BUT a lot of times Fed moves are Fake moves. what if this is a failed breakout of the short consolidation and then the dollar drops 100? Ruh Roh. Think about that.

I know gold and bonds are left for dead. (Seriously, will not even pick their head up off the mat dead).

gldtlt

First and foremost, right now I have been wrong about gold and bonds Bouncing. I have been saying gold is turning since 1172 and I said that I am going to reanalyze this under 1150. Well, we hit 1139 today and I am analyzing it now. If gold does not reverse over the next 24-48 hours then you have to get out the first bounce you get. Do not capitulate at the lows, there will be a bounce even for 1-2 days).

Same thing with bonds. If bonds do not reverse over the next 24-48 hours then you have to get out the first chance you get.

In closing, I still need some more evidence of the dollar before I believe in strong America, strong dollar, Hail Trump, blah blah. We need a little more promise from King Dollar.

I leave you with this: things don’t go down forever. When gold and bonds bounce — and they will — how much the dollar gives up is very, very important. The dollar better not give up 100 again anytime soon, because from failed moves come fast moves.

 

 

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One response to “The FED HIKED-Duh-Now What?

  1. I enjoy the transparency of your thoughts. You looked prescient and perfectly ahead of the curve in your Gold and Bond thesis initially. These are tricky trades for contrarians in that timing is the main issue, as it relates to staying power or conviction. We know generally that contrarians are right…..but. when. You are giving a couple days for escape and warn the reader to not capitulate at the lows, which the markets seemed designed for, to make new and intermediate traders panic in moments of real pain. Size usually alleviates the pain, but that messes with initial conviction. This particular point in time is making people’s year and breaking others’ year. Critical observations and choices coming up.

    Like

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