FOMC in Review
|FOLLOW THROUGH? - Ok..so that was actually exciting! The Fed decision didn't disappoint as far as volatility went and the market went bonkers after the central bank signaled 3 rate hikes in 2017 versus the 2 that had been anticipated. The net result? Well at least into the Wednesday close. The market reacted intuitively. It bought more Dollars and sold equities. Of course, as much as I love this equity short (out of the money right now), stocks have managed to evade the grasp of fundamentals and logic and I will be looking on to see if we in fact get more deserved follow through from Wednesday's reversal.
TRADES - What else happened? Well all the wildness out there let me do a lot of what I wanted to do in recent days. I got to buy more GOLD around $1150 and sell USDJPY into this already stretched rally. Days back I was looking to sell USDJPY around 115.00 and that patience has given me the opportunity to get a better entry at 117.12. Of course, I don't know if this trade will work out, but I do love taking the shot here and believe the level of extension makes it super compelling for some form of a pullback.
DECEPTIVE - I won't go into the Fed decision too much but I will say that Yellen was super deceptive when it came to answering a question relating to equity valuations. At first she tried to avoid answering and then when pressed, she said stocks were trading at 'normal' levels. But the takeaway here is that she needed to accompany that statement with another statement which was that stocks were trading at normal levels considering where monetary policy was at. WELL YA!!! OF COURSE!! So basically, stocks ARE NOT at normal levels. They are only at normal levels if you assume the abnormal is normal. Yes! It's absurd!!
LOOKING AHEAD - Going forward, the US Dollar stands to gain in the aftermath of what appears to be a more hawkish decision than expected. And while a higher US Dollar has been a weight for GOLD, I don't think it's the sole driver of GOLD direction and I believe that if we continue to head in the direction we're headed in with monetary policy, irrespective of where the Dollar is trading, GOLD should start to once again find solid demand. Remember, GOLD is also technically oversold on the daily chart as well. So why am I short USDJPY? Well, with this one, it's a little trickier. On a very basic level, this trade is purely technical, with me looking to find an overdue correction. On a deeper level, if risk comes off, it should invite renewed demand for the Yen. Anyway, let's see.
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