I fought the Fed and the Fed won, I fought the Fed and the Fed Won. Needed money so they printed some I fought the Fed and the Fed won. What is that they say about never fighting the Fed? Well at the very least do not underestimate the way this Fed can change the marketplace. The Feds timing of this move to quantitative easing still has the market coming to grips with the shorter and longer term effects on the economy and the markets.
The one thing that is for sure is that the rules of the game have changed. And when it comes to a knife fight and Fed power there are no rules. Someone say one, two, and three, gold! In a blink of an eye the Fed with its unlimited power to print money can change the dollar value of a commodity or its long term trend in an instant. By creating inflation and money out of thin air they can change the entire commodity trend as we know it and drive away the deflation demons of that particular moment. Being short commodities has become a more dangerous proposition and the FED has put us on notice. The Fed at anytime can run the printing press and change the fate of a commodity. They do this not because they created a global shortage of a commodity or because of sky rocketing demand. It is because the Fed has the ammunition to make it so.
Oh sure you can say that the Feds policy of quantitative easing is as simulative to the economy as a good old fashion interest rate cut but at the same time it has the potential to be much more inflationary. And the Fed now that the FED has opened that Pandora 's Box the markets are now from this point forward have a more complex element to them.
Not only that the market seemed a little shocked at the Fed's timing of this historic and dramatic move. It's not that the market was on guard for the possibility but after Ben Bernanke Emmy winning caliber performance on 60 Minutes the thought was that this silver easing bullet would be saved for another time. Is there a best actor award for a Fed Chairman and a cherry disposition in a continuing role? Why quantitative easing now? The markets were screaming for it at the Last Fed meeting and it did not happen. Now with the economy supposedly getting better the Fed makes this move now. We know things are bad but are they really worse? Did Ben mislead us when he said that the recession could be over soon?
There are two possibilities. One is that re much worse than they appear. The other is that the Fed thinks things are getting better and wanted to give some to shock and awe stimulation to this feeble recovery with the hope it will turn into a full-fledged spurt of unbridled economic growth. Inflation can be ok as long as it comes with economic growth. The Feds gamble is that this will stimulate the economy by removing the deflationary risk and drive down yields to get businesses and mortgages moving again.. The problem is that if we don't get the growth to overcome the inflation risk you get the dreaded stagflation. The fear is that the Fed move might not be simulative enough or will not have the desired effect.
For Commodities and oil if this is just and inflation plays that this is no good. If oil is driven higher just because the Fed is printing more money as opposed to improving demand the FEDs move may actually damage the economic recovery. If the dollar continues to plunge against other major global currencies the FED is in the same weak dollar position that they lamented about earlier on in this crisis. In other words if the inflationary effect on oil outweighs the economic stimulus effect of lower long term rates the oil drag on the US economy is headed towards the dreaded stagflation scenario. Stagflation is a real danger for the Fed and its unending arsenal of money. This is the Feds biggest gamble. It is like the feds version of the surge in Iraq. It is make or break time. If the printing of money cannot change the direction of this economy then get out the wheel barrels to fill up with cash and try to pave your portfolio with gold. If it works and the economy starts to grow the Fed will have to put on the breaks and commodities will fall. If commodities stay strong and the recovery doesn't not keep pace the prices will start to fall again. That is until of course the fed starts printing again. Have a great Weekend!! Happy brackets to you all!
Short May Crude apprx 4890 on rollover stopped 5150 Buy may crude at 4430 stop 3900
Sold April Heating oil apprx 12700 stopped apprx 13300 Buy April Heating oil at 12000 stop 11400
Short April RBOB apprx 13500 stopped 14300 Buy April RBOB at 12500 stop 12300
Sold April natural gas Apprx 437!!!!!!! Lower stop 39900!!!!!!!
The Dan Flynn Corn & Ethanol Report
The May Corn settled at 398 up 1 1/2 cents.
The range was 398 to 393 1/2. I beleive the Bulls are about to swagger in a oversold market. This coupled with a cheaper U.S. Dollar could give a higher spike.
Energies are lower as I write. Eyeballing the Dollar, Whats a trader to think ?
Stay focused in the U.S. Dollar !
Have a great trading day !