Wednesday November 24, 2010 - 16:55:47 GMT
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Black Swan Capital - www.blackswantrading.com
The Post-FOMC Minutes, Pre-Turkey Day, Data Dump
Hereâ€™s the data dump:
claims have fallen to a level not seen since July 2008. Thatâ€™s good.
orders fell by -3.3% versus expectations for no change. Thatâ€™s bad.
PCE price index a tad lower than expectations; core PCE price
index at record low. Whereâ€™s the inflation?
a tad higher than expectations: +0.3% versus +0.2%. Thatâ€™s decent.
saving rate a tad higher than expectations, up +0.1% from September to
income rose by 0.5%. Thatâ€™s good.
So we have positive news for the
consumer with not-so-good news for economic activity. The kneejerk
all of this is so far positive for stocks. A short-term chart of the
500 futures shows prices spiking to test the underside of the 72-hour
average (center line). If the reaction rally fades here, we would expect
S&P heads back towards the lower bound of the Bollinger Bands:
[Chart not available in
This move in stocks created a
similar risk-appetite reaction in the currencies â€“ the US dollar falling
rather sharply towards hourly support. Looking at the 72-hour moving
and Bollinger bands, the US dollar index has some room to the downside
gets through near-term support:
[Chart not available in
Now letâ€™s broaden our scope, and
see where all this data can be pieced in ...
Thereâ€™s a computer generated
parody being passed around about the Federal Reserve and the
easing. It basically serves to bash QE2 and the Federal Reserve and all
disingenuous connections between Fed policy decisions and Goldman Sachs.
the dialogue worth noting today, which admittedly is an exaggeration,
when the question is asked: â€śHas the Fed ever done anything right?â€ť The
Surely they have done some things
right, even if those things go unnoticed as their errors become heavily
publicized. Which brings me to something in the FOMC minutes yesterday,
specifically the committeeâ€™s discussion on what other measures (besides
could take to do whatever it is they say they want to do by implementing
First, here are two ideas weâ€™ve
discussed here and there over the last couple quarters:
1) The markets have returned to
order in large part thanks to policymakersâ€™ heavy-handed approach and
up investor sentiment. Itâ€™s been very frequently argued that all
bailout efforts have been, conspicuously or inconspicuously, aimed at
and too-big-too-fail institutions ... rather than Main Street. The
been a tangible recovery in the markets, with a much more shaky recovery
2) The Federal Reserve is losing
its credibility. This idea was also mentioned in that video parody. But
real pressure began way back with introduction of the House of
bill to audit the Fed, led by Congressman Ron Paul. The Federal
and decisions, all the more important in tough economic times, have
under severe scrutiny, seemingly for good reason.
So ... in looking at the minutes
yesterday, it was surprising to see that â€śhaving Chairman Ben Bernanke
periodic news briefings,â€ť according to Reuters, would be something the
would think of as a way to reverse high unemployment and incite a pickup
activity. It seems it would be a mere supplement to the ongoing
management campaign that policy-makers maintain.
Then again, it could be looked at
from a â€śtransparencyâ€ť angle and welcomed in that regard. But it simply
how much the Fed believes bolstering sentiment will support the markets
turn, encourage economic activity -- a tall task, indeed, considering
public perception of the Fed at this moment in time.
Even still, what would periodic
news briefings do to the spin cycle that todayâ€™s constant flow of news
become for the markets? Agitate it a little more, maybe. With all the
of the Fed, the public understands and respects the magnitude of its
move, and the Chairmanâ€™s every word, perhaps even more warranted.
Which brings us to the growth forecasts
scattered throughout the FOMC minutes ...
As might have been expected,
their outlook is not pretty. Their growth forecasts have been revised
their expectations for unemployment have become less optimistic. The Fed
forecasts, however, are rosier than those of private economists as this
[Chart not available in
Basically, it leaves open the two
scenarios as discussed in yesterdayâ€™s writing: 1) US dollar catches a
as lower US economic forecasts add to other global economic risks coming
head, or 2) US dollar resumes a steady decline as the US is seen as the
laggard among major economies.
Itâ€™s a whirlwind of US data
shaking up prices right now, but the way prices have unfolded this week
until now we tend to gravitate to the former scenario as that which will
markets most, at least through year end. If this data-driven
is reversed before the day is over, it would lend some support to the
scenario. We were busy with issuing new trading alerts this morning,
yesterday very nice, very quick, gains in the euro and Australian
Please reference the chart updates for details on these new positions.
John Ross Crooks III
Forex Trading News
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