Finally, the Federal Reserve addressed what many, including myself, thought inevitable.
Starting in October, they will begin to reduce the balance sheet of $4.5 trillion and potentially raise the rates (guessing another ¼%) this year.
Why didn’t they raise the rates today?
Concerns about the recent hurricanes and low inflation, stubbornly below the 2% rate the Fed likes to see.
In the past, I have written my concerns about the old addage, “Be careful what you wish for.â€
As a former commodities trader back in the day during out-of-control inflation, it’s news to me that supply/demand follows an orderly and linear model.
The way I see it, storms and drought are not only troublesome at the time of occurrence, they both can wreck serious havoc on raw materials in the not-so-distant future.
Interestingly, the latest Wells Fargo/Gallup Investor and Retirement Optimism Index hit 138 in September, its highest level in 17 years.
That means, like its statistical predecessor in the year 2000, folks believe the bull market has little chance of ending.
True or false, has the time come to slowly build a portfolio in commodities?
Let’s first review Monday’s analysis on IWM or the Russell 2000, the Granddaddy of the U.S. economy.
The week ending July 31st IWM made a high of 144.25.
Not only does that number match the top of the rising channel on the monthly chart, it sits as a beacon for either a new leg up or the possibility of a double top if it cannot clear.
Today, IWM posted a high of 144.02.
Furthermore, looking at the weakest sector-Granny Retail (XRT), critical support sits at 40.00. Below that level, a huge component of the GDP begins to suffer another blow.
Meanwhile, Transportation or IYT, filled the small gap at 173.38 from the low in July 18thand continued higher. Good for equities.
To further mix the pot, Semiconductors (SMH) failed to hold the runaway gap. In fact, SMH had a significant reversal pattern from the highs with better than average daily volume.
