Whenever I feel I am writing about too many negatives, I like to take a pause and look at what could happen if those problems move away from the radar, even temporarily. If the Feds so much hint at a rate cut ( I doubt it, but who knows), we will have a short covering rally that will blow the roof to the sky. Should that happen, I would be in large cap techs, the next big upside move, aside from gold. Watch NQ weekly S1 at 1736.50 if we drop once again (NQ, NDX June futures, has a 20 point premium to cash). It would be a slightly higher low week to week and if it holds, it would be telling us something. A drop below that level would usher in some very heavy selling, so be careful. But I sometimes like to buy selling ahead of the Feds. However, if we rally from here into the Feds, I would not chase it and maybe even short it. In conclusion: an NQ drop to weekly S1 that holds before the Feds could be a buying opportunity. By the same token, an early rally before the Feds would be suspect.
With the China rate hike, the selling on Monday scenario seems more likely.
As for gold, rate cut talk will send it even higher. Inflation risk would increase while the dollar drops some more. The danger for gold is a rate hike, of course. I don't think the Feds would be that aggressive, but keep that possibility in mind as well. It's all about positioning ahead with a cushion.
With the China rate hike, the selling on Monday scenario seems more likely.
As for gold, rate cut talk will send it even higher. Inflation risk would increase while the dollar drops some more. The danger for gold is a rate hike, of course. I don't think the Feds would be that aggressive, but keep that possibility in mind as well. It's all about positioning ahead with a cushion.
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on Saturday, March 17, 2007 at 3/17/2007 01:44:00 PM.
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