We Are Now In The Calm Before The Fed Storm, But The Markets May Just Get Interesting Anyway

SD Outlook: Do the metals take-out key moving averages, and does the stock market have a final surge to all-time highs left in it? Here’s some insight…

There was no gas attack in Syria.

Thank God.

In fact, one quick looks shows Syria isn’t even in the news cycle anymore.

But that doesn’t mean a gas attack is not coming, and that does not mean we are in the clear yet.

Since the Deep State pulled-off the false flag chemical attack to justify military escalation twice before (which the alternative media and actual boots on the ground in Syria picked apart in mere days), this next false flag will have to be huge.

That means Hollywood style huge.

All we can do for now, however, is monitor the developments.

Oddly, not even Hurricane Florence is dominating the news cycle. The globalists do not want Kavanaugh in the Supreme Court, for whatever reason, so his confirmation is dominating the MSM once again.

The other item that is still in the news, and which is slowly starting to affect us more and more every day, is the trade war.

Here’s a fresh Tweet from just this morning:

Amazing.

I mean, ultimately, nobody wins in a trade war, yet somehow we’re totally winning it? Not only that, but President Trump just created a new buzzword to replace “You’re Fired”, and that is “Your Tarrifed”.

Look and listen for it.

The first time he uses that term, does that mean the Presidency has converted into a reality TV show?

If it does, we’re almost done with season two. Here is what we are presented with so far:

  • Ongoing Russiagate/Russian Collusion drama.
  • Ongoing drama of the “do whatever it takes to derail the Trump Presidency”.
  • Trade Wars drama.
  • Booming economy and jobs market drama.
  • Getting tough on crime, immigration, and corruption drama.

Season two could be summed up like this: Lies and pipe dreams. Just look at the bulleted list above.

Thankfully, what will not be in the news this week are the Fed Heads.

Since we are in the week before a “live” meeting week, meaning a press conference following the 2-day FOMC, the Fed Heads refrain from yapping their pie holes in public. The markets are so delicate, the Fed cannot risk any mis-interpretation of anything they say, so they just don’t speak.

That said, there will be the typical Fed cheer-leading from the mainstream financial press, and there will be the Fed apologists arm-chair quarterbacking the Fed’s FOMC next week, but thankfully no Fed Heads themselves.

Speaking of the FOMC next week, where do things stand right now?

Not only is the CME Group putting the probability at 100% of a hike:

Look at the chart above and notice what it tells us.

Not only is the probability certain of a rate hike, but there is more than a 5% chance that the rate hike will be a 50 basis point hike and not just a 25 as the Fed has been doing. Right now, the rate is 1.75% to 2.0%. The actual rate floats, generally in the middle of the range. That said, the overnight Fed Funds Rate, assuming they are actually enforcing said rate, will finally be over 2.0%, and could, if they hike 50 basis points, be above 2.3%.

We have got to be getting close to the “break” part of the “they’ll just keep hiking until they break something” meme.

Finally, while the calendar is light on data and speeches, notice highlighted data, particularly Tuesday through Thursday:

We get a more housing data mid-week.

Remember, we are hearing more and more that this housing bubble 2.0 is beginning to pop, and depending how the data looks this week, we may get more confirmation of that.

The gold to silver ratio has been in a wide range:

Let’s call it a full two points, between 84 and 86. Granted, whether it is 84 or 86, the GSR is still screaming “buy silver”.

Everybody has to choose their own personal level for investment decisions. For example, if the ratio is over 70, I might not buy gold, and if it is over 75, I’m definitely buying only silver. That’s how I use the ratio when making regular investment decisions. That is based on the fact that historically, the ratio does not sit at this high level for long.

Speaking of the two, gold and silver have risen slightly in the overnight and morning session:

Gold looks to open the week above $1200 and silver above $14.20.

Everybody is looking for silver to retest the December, 2015 lows. I think with the dip below $14 and subsequent rebound to back above 14.20 last week, I think we did just that, but we’ll have to wait-n-see.

Either way, we see the new Sideways Channel of Pure Agony in silver:

I don’t think it will draw out for half a year like the last sideways channel, however.

Here we can see gold wanting to start a new up-trend:

There is plenty of time for gold to break-out above the 50-day, which would be bullish, and put in a new higher-high, which would also be bullish. Furthermore, if we do have one last melt-up in the stock market, we could see more people finally beginning to put on a hedge by moving some investment money into gold, and that would also be bullish.

There are many other reasons why the set-up is bullish right now, but suffice to say, those three simple reasons above are the reasons I’ll argue to start the week.

Keep it simple, right?

Palladium has a chance to break-out above its 200-day moving average:

Again, there is plenty of time for these moves to develop. We have five full trading days ahead of us.

Even platinum doesn’t look terrible right now:

It would be great for platinum to break-out above its 50-day moving average, and like with gold (50-day) and palladium (200-day), platinum has a full week of trading to try and accomplish that task.

Which brings up a point about Silver.

Silver is not even close to its 50-day, which means that if these metals do break-out, silver could really get moving and catch traders, investors, and possibly even the cartel off-guard.

Said differently, silver’s 50-day moving average is $15.04, and a break-out above the moving average would put silver close to where there must be automatic buy orders for all those spec shorts, and that means that if silver does break-out, as do the other metals, we could see the triggering of the short-covering.

I’m not saying that will happen, but I am saying that things could finally get interesting this week.

Crude oil is still hanging around $70 a barrel:

However, the two major moving averages are now starting to slowly converge, so crude really needs to turn up again if the bulls are to be satisfied.

Copper has been pretty erratic with its swings lately:

A surge higher would be bullish for commodities in general, and silver specifically, a break-down from here would be a bad omen for the entire economy.

Here’s the chart of the Dow:

We basically have 500 points to get to 2666X.XX (such as 26669.27). Since the Dow is so high anyway, all we are talking about is a less than 2% move on the week.

That is entirely possible, and which only supports my earlier statement that things could get very interesting this week, going into what will be a truly interesting FOMC week, especially if going into the FOMC the stock market is at all-time highs.

The VIX has been helping out the stock market with peak complacency:

But with all the turmoil that is brewing in the economy and geo-politically, it is hard to imagine the VIX staying at peak complacency for much longer.

Where gold and silver are set to open higher, the US dollar is set to open the week lower:

Like I said last week, if the dollar falls this week, that chart will be looking pretty bearish, especially if we put in a new, lower-low.

Finally, the yield on the 10-Year has a decision to make:

Because it is highly unlikely that yield is just going to sit here at 3.0% for long.

Sure, yield could sit at three percent or even rise somewhat further this week, to see if the stock market can muster that final surge higher, but with the FOMC next week, and the fact that we didn’t just consolidate at 3.0% the last five times we have been here, there is every reason to expect a break-out or a break-down in yields.

The government cannot afford higher rates, so it make bring yields down with brute force, but that would be to the detriment of the dollar.

Again, it bears repeating, no pun intended: This could very well be the week when things start to get interesting again.

Even if we are in the calm before the Fed storm.

Stack accordingly…

– Half Dollar


 

About the Author

U.S. Army Iraq War Combat Veteran Paul “Half Dollar” Eberhart has an AS in Information Systems and Security from Western Technical College and a BA in Spanish from The University of North Carolina at Chapel Hill. Paul dived into gold & silver in 2009 as a natural progression from the prepper community. He is self-studied in the field of economics, an active amateur trader, and a Silver Bug at heart.

Paul’s free book Gold & Silver 2.0: Tales from the Crypto can be found in the usual places like Amazon, Apple iBooks & Google Play, or online at PaulEberhart.com. Paul’s Twitter is @Paul_Eberhart.

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