Here we go. Today is another FOMC meeting, but everyone knows what they are doing to do or going to do (phrase it the way you like) and that is nothing new! They cannot raise interest rates, so will just say that they are waiting for economic growth and inflation to hit targets before they start to raise rates and even though inflation is above 2% annualized CPI growth, which always had been considered a danger level in the past, they say they don’t care about it right now.
That’s what they did at the last meeting is what they’ll do again today. Nonethless, FOMC days can create bizarre temporary gyrations in the hours after the edict is released. I guess it is trading robots reacting or funds taking strange positions into the meeting that causes it. Whatever the case, the best thing is not to get shocked by a strange market gyration, but to instead focus on the existing underlying trends.
Right now they are simple. The S&P 500 and DOW are outperforming the Nasdaq and all three are rallying. Interest rates put in a secular bottom last year and we saw the bond market fall down in the first quarter of this year and get oversold in March. Bonds have been bouncing since, but that bounce has run out of steam and the bond market is setup to drift, for weeks if not months.
Leadership is now in commodities. You have seen commodities go up across the board with limit up moves in corn and wheat. Now coffee is breaking out. Gold has been rallying since market and silver is acting stronger than gold.
None of these underlying trends are going to change today even if the DOW dumps on the close. It could rally too. The point is FOMC days bring meaningless noise.
One of the things I am now watching closely is the price of silver, because it is in a position to breakout at any moment. It could happen today or it could happen tomorrow or next week, but silver looks like the next commodity getting ready to run. Of course, this will be good for silver mining stocks, but it will also be good for silver ETF’s, such as SLV, which I have a position in.
SLV has short-term resistance at $25.00. I’m looking for a close above that level to trigger the next rally. Of course, silver is hardly the only commodity going up now. This year has marked the start of a broad based commodity run that is likely to last for years. Inflation is now here.
Last week I talked about the 100 year old classic trading book Reminiscences of a Stock Operator, which is based on the story of super trader Jesse Livermore. In this video I talked about another lesson from the book that applies to investing and trading now. In fact, I applied it Monday in a unique commodity exchange traded fund that tracks one commodity that you likely consume every single day.
To learn more about my trading methods grab my book Strategic Stock Trading.
-Mike
