Home > Uncategorized > 2012/01/04: Quick Post: Does This Really Get the Fed More Cred?!

2012/01/04: Quick Post: Does This Really Get the Fed More Cred?!

© 2012 ROHR International, Inc. All International rights reserved.

And then there was yesterday’s FOMC meeting minutes release. With all due respect for the Federal Reserve’s attempt to create a sense of quantitative easing (QE) without actually expanding its balance sheet, what in the world does a federal funds rate forecast for the next several years do for economies or markets?

It was shocking enough the original guidance of exceptionally low interest rates “through mid-2013” was replaced by this new policy. But other than a triumph for Mr. Bernanke’s endless drive for more transparency what does this actually accomplish?

Consider for a moment that the Fed is eminently fallible in its forecasts. As such, all this will ultimately provide is further fodder for those who want to point to its lack of prescience in the very area where it holds sway over economic and capital markets sentiment. And as we have seen since the original extended rate projection policy was initiated in August of last year, this was not worth much more than a very brief fillip for equities; which began to fade an hour after the announcement.

General Market Observations and EXTENDED TREND IMPLICATIONS

First-day-of-the-year surge will likely end up a passing fancy, if March S&P 500 future Closes back below 1,264. However much Tuesday’s positive economic news conspired with cash waiting on the sidelines from the choppy end of 2011 trading to create a March S&P 500 future surge above 1,270, back below the 1,264 previous rally high defuses the ‘runaway’ potential. Allowing that the economic data remains somewhat mixed to the strong side, the European government bond situation is still vexed. That is reflected in many of their banks appearing vulnerable, with the commensurate weakness of European equities relative to the US. This is most evident in the performance of the DAX, which only tested upper-6,100 early-November and early-December trading highs.

As for other asset classes, March T-note future is still holding so far at no worse than mid 130-00 support, with more major support waiting in the upper 129-00 area. And while they are somewhat weaker, the same can be said for other long-dated government bond markets. Similarly in foreign exchange, the US Dollar Index held well on yesterday’s test of its late year .7950 UP Break, which is the complement to the euro failing to push back above resistance at EUR/USD 1.3050-80 even if it did manage to hold its 1.2860 support in a quiet holiday trade last week.

The energy market remains elevated as well, but that is somewhat a subset of Middle East concerns rather than purely economic indication; Iran is a critical current influence. And it is ultimately not constructive for equities if the February Crude Oil future continues to push up for any extended move back above recent 102.00-103.00 resistance in the near-term.

February Gold future is also up again today on the back of improved economic sentiment to some degree, yet also likely on the back of those same Middle Eastern crisis concerns; which admittedly extend beyond Iran. It is even possible that renewed stresses in Europe could be attracting a ‘haven’ bid back to the yellow metal, or deflate it on sharp equities weakness.

And in consideration of that somewhat schizophrenic influence on the overall trend, it is far more practical at this point to rely on the sharply defined technical trend parameters. In the event, February Gold future has very significant resistance from its previous major channel DOWN Break and weekly MA-41 anywhere in the 1,615-30 range. Unless it can once again sustain activity back above that threshold, it must be assumed that it will retest the previous congestion and recent short-term Island Bottom in the 1,557-1,526 range.

We hope you find this useful.

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