The price of gold continue to surge as the US dollar weakened further on Thursday. Here is a look at what is propelling markets right now.
Yesterday’s Buying Was Frenzied
December 14 (King World News) – Art Cashin, Head of Floor Operations at UBS: The rally continues but begins to slow a bit as we move quite into overbought territory.
Yesterday’s buying was somewhat frenzied and has taken a large portion of stocks to rather extreme levels relative to things like moving averages.
They may begin to pause. Also, some slowing after Lagarde spoke. Some of the brokers I spoke to said she did not sound as bullish as Powell did, but I think that is because the ECB has a single mandate, and it is about inflation rather than employment. So, it is from somewhat different perspectives.
That having been said, money will be shipping toward the market and should cushion any type of corrective pullback. So, I think we are seeing more of a consolidation than anything else.
Another interesting matter is that according to the Wall Street chatter I hear, Janet Yellen’s credibility has been greatly enhanced by the Fed move and she was leaning bullish before, talking about things like soft landings in her interview with Sara Eisen on CNBC. At the risk of bumping into her former colleagues at the Fed, she seemed to express views about where rates would go, where value would go and, as I say, the recent Fed decision has apparently enhanced her credibility. We will watch that carefully.
Last night, I did the annual walk back and look ahead interview with Bob Pisani over at the bar at Harry’s on Hanover Square and the great man Harry himself was there to share a cocktail or two with us. We got a chance to interview him. Harry is one of the most beloved characters in Wall Street. A guy who as a restaurateur carried a lot of traders and brokers through hard times and for that he gained many friends and a loyal audience. Hopefully, some of that will be in the interview. We will try and get details from Bob as to how you may access the interview. Those in the crowd around the bar thought it quite an interesting interview. Not because I was involved in it, but because it carried a good many areas and, of course, as I said, some conversation from Harry himself about Wall Street and changes in sixty or so years he has been catering to the trading crowd.
So, at any rate, we think the market may begin to pause and catch its breath, but there are no technical signs that a corrective reversal is due. It looks like the bulls can easily remain in control till year end and, as we have been saying for a couple of days, traditionally, the markets take a pause as you go into Christmas itself. Many people forget that the Santa Claus rally, in fact, starts pretty much after Christmas and it is the final five trading days of the year and the beginning in the New Year that new positions are taken.
We will get through some of that and get to that access data.
In the meantime, please stay safe.
Arthur
ECB To Hold Rates Higher For Longer?
Peter Boockvar: While the European Central Bank doesn’t have an official dot plot, they have their own form of revealing what their individual member expectations are thinking in terms of the future of rate policy and it’s unofficially called by me, The Press Leak.
Bloomberg News is reporting that “ECB policymakers are largely united in expecting to cut interest rates later than financial markets currently anticipate, according to officials familiar with their thinking.”
Further, “The Governing Council discussions this week featured some irritation about aggressive bets on lower borrowing costs and some members were confounded by the extent of easing priced in by investors, said the people, who asked not to be identified because the deliberations were private.” Jay Powell in contrast of course, along with many of his colleagues, have embraced the extent of easing priced in by investors.
The euro is at the high of the response.
Prior to this story, the overnight index swap was pricing in a 39% chance of a rate cut in March and 100% by April. By October, the swaps market is pricing in a 2.60% ECB deposit rate vs the current effective rate of 3.90%.
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