Overnight we saw the US Dollar rally, and like physics, every action has an equal and opposite action, in this case, we have the crude, gold, and grains backing off from their strong settlements Wednesday…Typically this is how a bull market looks, new highs, backing off and digestion, and then the rally continues, usually in the face of sometimes bearish news…
Will the Fed step in an defend the dollar with surprise rate hike? The Fed is supposed to be A-political, but certainly a surprise rate cut would most likely cause a flight from equities to some fixed income, although with yields so low, it may be argued that it will take a number of rate hikes to really draw money from “risk exposed investments” ie the markets, back to “risk less” rates of return via government paper…
Time will tell, but I think its interesting that no one in the administration came out to tell Paul Volker to go soak his head after he made comments 2 weeks ago about eventually defending the dollar, squeezing out inflation, and defending against an overheated economy…Although with unemployment officially around the 10 percent mark, with the larger unofficial number, including people who have given up looking for jobs, is closer to 17 or 18 percent depending on whose numbers you buy…
Raising rates in such an environment would be ballsy, to put it lightly, but perhaps the fed has longer term plans…Again, only time will tell..
In the mean time, I think we see pullbacks today in the stock indexes, in the grains, I see good chart support in the beans around ten bucks, good trade in the corn around the 4 dollar mark and good trade around the 525 level in WZ..
Its raining like no one’s business here in Chicago, and that, will be short term bullish, as farmers struggle in wet fields to finish the harvest… The harvest will proceed and will get done… We are not talking biblical rains here, folks, but in the meantime, it may delay wheat planting somewhat, and the moisture content of the corn coming in may be less than desirable…
Look for more analysis in my afternoon update…
On a final note, If you are reading this,,,feel free to leave a comment or send me an email at christianrobinson1@gmail.com
Good Trading