The dollar is flat. Oil is down; copper is up. Gold and silver are up. Bonds are up.
There’s lots of stuff going on out there…and several things conflict.
The next FOMC meeting is Wednesday. Wall Street expects rates to increase.
But if rates are going up, wouldn’t the dollar be stronger than it is? It has dropped two straight weeks and closed Friday at its lowest level since February. Either the rate hike is priced in or the dollar doesn’t think rates will move up.
The large caps have been leading the small caps. This is something that is helped by a weaker dollar, so in a sense the out-performance has somewhat predicted the dollar pulling back.
Gold has fallen 9 straight days, presumably in anticipation of a higher rate…even though the dollar has been weak lately. The commodity’s reaction to Wednesday’s news will be very telling. If gold moves up, we con conclude the news is already priced in. If gold drops, it may be game over.
We don’t know what’s priced in, what is waiting for the Fed or what still needs to react. There are a lot of moving parts, and right now everything isn’t on the same page. There seems to be some disconnects and weird anomalies that need to be worked out.
This is a big week…not one I want to have a massive amount of short-term exposure in.