Fed Pivots

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The Fed pivoted yesterday by confirming lower rate hikes going forward:

“This is the Fed’s way of telling us that a slowdown in the pace of future hikes is upon us.” – Peter Boockvar.

“The statement is clear that they would like to slow the pace of hikes. In addition to looking at the data and looking at markets, they are also now considering the cumulative impact of what they have already done.” - Eric Winograd, AllianceBernstein.

"'Cumulative tightening' and 'lagged impact' suggest that this will be the last 75 bp hike and in December the move will most likely be 50 bp.” - Ian Lyngen, BMO Capital Markets.

But the pivot was already priced into the markets, so when Powell threw out one hawkish statement after another in the conference call, most markets dumped while the dollar soared. My beef with Powell was that this could have been done in the statement instead of the conference. Yet he enriched the Banks on the long side with a dovish statement and then allowed them to clean up on the short side once the hawkish conference call began. In essence, the Fed pivoted but did so in a way that the markets did not go risk on—quite the opposite. Mission accomplished.

The principal hawkish statements were that the terminal rate could be higher than previously estimated and that rates would remain higher for longer. And inflation was supposed to be transitory too.

GOLD

Nothing has changed in Gold. In order to end the series of lower highs and lower lows and change the trend to the upside, we need at least a higher high above 1740. A break of 1700 first would be encouraging. Until then, the risk remains down.

~1620 remains support, but the more often we test this, the more likely we’re heading down to the 1500s next.

SILVER

Until we break 21.31 and the 200-DMA, the risk remains down.

GDX

Until we break 26.11, the risk remains down.

SILJ

The same goes for SILJ. We need a break of 10.13, then the 200-DMA, to start the fireworks here. Yet again: until then, the risk remains down.

Non-Farm Payrolls and Average Earnings on Friday will provide greater insight into employment data and wage inflation. Then next week we get the CPI and PPI. All of this data will factor into the Fed’s next rate hike and therefore the markets at large.