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Norcini - Wild Trading After Fed Release, What to Expect Next
With the Fed increasing Operation Twist by $267 billion, and European leaders meeting today, King World News interviewed highly acclaimed trader Dan Norcini. Norcini told KWN that “After traders realized QE3 was not off the table, up gold and silver went and they closed well off their lows for the day.” Norcini also had this to say regarding the markets: “As someone who has actively traded these markets for over two decades, I find what our markets have deteriorated into to be very distressing.” But first, here is what he had to say about the move by the Fed: “The Fed took the safest, most conservative route they could at this stage of the game. Some of us have argued that it was a little early for the Fed to pull out their big gun of QE3. By going with this type of increase in Operation Twist, it leaves the Fed with more room if we are right back where we are now in a few months.”
© 2012 by King World News®. All Rights Reserved. This material may not be published, broadcast,
rewritten, or redistributed. However, linking directly to the blog page is permitted and encouraged.
June 21, 2012
Dan Norcini continues:
“Initially there was disappointment on the part of traders who were expecting QE to be imminent. They dumped equities, bonds had a rally off the lows, and gold and silver were hit. But at the end of the day we’re right back to where we were before, where everyone is expecting QE3 at a later date.
This goes back to what Michael Pento said in his KWN interview ahead of the Fed decision, that the conditions were such that the Fed was not ready to pull the trigger just yet....
Continue reading the Dan Norcini interview below...
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“The stock market has not been beaten up that bad. We are still close to the highs. The dollar is still trading around the 81 to 82 level, and you have the 10-Year trading around 1.65%. So the question really was, what good would a QE do at this point?
I believe conditions would have to deteriorate further to trigger that kind of move. That means we would have to see the equity markets breaking down, and we would have to see the dollar threatening to get up above the 88 to 90 level. We would also have to see the unemployment level heading over the 8.5% level.
At that point you would definitely have all of the conditions in place to see QE3.”
Norcini had this to say regarding the trading action in gold today: “When the news from the Fed hit the wire, both gold and silver dropped sharply. Gold dipped down below the $1,600 level, and silver was absolutely mauled. Silver was trading near the $28.40 level and fell almost a dollar an ounce on the news.
After traders realized QE3 was not off the table, up gold and silver went, closing well off their lows for the day. If we shift the focus over to the mining shares, the HUI ran up toward that 460 level again, but once more the mining shares ran into selling at the 460 level.
So 460 is becoming an important short-term level. What the bulls need to look for in the HUI mining index is a weekly close above the 460 level. That would most likely indicate a change in sentiment in the gold shares and the index would then be ready to move to the 480 level.”
Norcini also added: “As someone who has actively traded these markets for over two decades, I find what our markets have deteriorated into to be very distressing. Here we are with the most sophisticated markets on the planet, and all traders around the world are waiting for a statement from the Fed and looking at a single word in that statement (the word was ‘very’) to determine what they are going to do.
These markets are no longer functioning as efficient allocators of capital. Investments aren’t even entering into the equation anymore. The markets have instead become a casino, where the roulette wheel is spun and traders place their bets wherever they think the ball is going to fall. That’s what we’ve deteriorated into.
As we move forward through history and people look back on this period, they will marvel at how the investment community could have degenerated into a bunch of Pavlovian dogs.”
© 2012 by King World News®. All Rights Reserved. This material may not be published, broadcast, rewritten, or redistributed. However, linking directly to the blog page is permitted and encouraged.
The interviews with John Mauldin and Egon von Greyerz are available now. Also, be sure to listen to this week’s line-up of other KWN interviews which include Gerald Celente, John Embry, Bill Fleckenstein, MEP Nigel Farage, and Michael Pento by CLICKING HERE.
Eric King
