March interest rate hike is factored into the markets. Again : March interest rate hike is factored into the markets. As most of the instruments I'm watching depends a lot of the dollar : so I always keep my eye on the buck. This time I'm pretty sure the dollar is finally ready to roll over and break down it's head&shoulder pattern. Most of the investors are still waiting for a rally on the rate hike. It's just not going to happen though. If you haven't read the chart from point to point it's time to do it now. ------------------------------------------ I noticed that the biggest rally was from 2014.June to 2015 March on the promise of the rate hike. No rate hike happened during this period. It's like a Hitchcock movie : you are the most scared when the murderer is under the table and you are waiting him to come out. When he goes into action you calm down. It's the same here: people were the most excited on the rate hike - and were buying - when the FED was talking about it : We are going to hike soon. Before every rate hike there is a "Rally of hope" when the FED is promising how they will hike 4-5 times / year. Then market got bored into a range. When the rate hike is coming insiders get the note. Then the FED makes obvious on an FOMC meeting or at a FED minutes (or Yellens speaks at Chicago) that the next FOMC is bringing the rate hike. That launches one final rally as the hike is getting baked in the cake. When the rate hike comes finally we have just a 1-2 day bounce (2015 Dec ) with an afterparty in a range where price was going nowhere. In 2015 this afterparty range lasted for 1 month. Then without any new high the hike event is just getting sold.
In 2016 the story was exactly the same. Only one thing was different : the afterparty lasted only for 2 weeks before the sell off.
Below the report I will post a chart in a few minutes where I highlight what I think is happening now. Something has changed. Yesterday Yellen made it clear an interest rate hike at the next FOMC meeting is almost a certainty : “March hike is likely appropriate if the economy evolves as expected.” And the dollar surprisingly didn't bounce on this news.
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The H&S pattern is still valid. But I see weakness here. Notice the left shoulder's and the head's trend (blue arrow) is much steeper than the right shoulder's trend. It means to me an "increase of suffering". It doesn't look to me wants to pop higher....
I think this time the insiders got the memo at the end of January. At the SOTU address Trump made obvious the rate hike hike is coming. We had only 3-4 days while the rate hike got baked into the cake. And when Yellen made obvious yesterday the rate hike is coming we didn't pop. Actually price was already in a decline since the morning and the drop just continued.
SlowStochastic and RSI is also showing that the "news baked in the cake" part is behind us... Indicators can't go deep into overbought territory just tagging. Price will fall in the following week We will complete the H&S . The question is how the retail euphoria will play out? It might be a bounce from the H&S neckline or we break it down and it will be a testback of the neckline...
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And one more interesting thing. The dollar drop started in the morning well before Yellen's speech. I think we had a dollar intervention early morning EST and that's the reason Trump was not talking about the dollar at the State of the Union... They agreed with the FED regarding this intervention. There was no need to talk about the strong dollar problem... So everyone gets what he wants: the FED is hiking the rates and Trump will get the weak dollar.
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Tj
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notice 2Feb2017 low is lower than 8Dec2016 - that's quasimodo - signalling south
party comes
chartwatchers
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@Tj, Failed daily cycle... Good notice! One more reason...
Tj
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@chartwatchers, it can fakeout to ~106 and then nicely to ~80
UnknownUnicorn645732
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love the theory.. totally in keeping with the BS ON WS. Sell them a Fed hike to show normalising and smack the $ down. Add seasonal Yen repatriation into year end for the Japs i.e sell $/ Buy Yen you have a perfect storm
Excellent insight: "So everyone gets what he wants: the FED is hiking the rates and Trump will get the weak dollar." Weak dollar, once investor realize that it's happening, will lead to correction is stock market. Foreign investors will be selling US equities.
Is to be true or is not to be, we cannot know, but this deserves LIKE, because of effort put into this idea.
Respect.
JesseL
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I was listening to Yellens presentation and notice an odd reaction in the price of Silver when she started her scripted presentation, and then followed up with her unscripted Q&A session.
In her Q&A session she stated: "I think most of my colleagues and I decided that we should simply be patient and wait to see what happens, and alter our economic forecast and views on appropriate policy until we have a clearer understanding"
party comes