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VIDEOThe FOMC Ignores Weak Housing
And the Fed statement has contradictions.
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How strong can the economy be when bank lending is contracting, and with this situation how can they predict that there will be a gradual return to higher levels of resource utilization in a context of price stability? With gasoline prices higher than all of 2009, with defaults and foreclosures rising, the Fed is turning its back to Main Street USA.
If the Fed believed that the US economy is coming out of recession, why do they feel compelled to keep the federal funds at 0 to 0.25% when we know that this giveaway is the fuel Wall Street is using to keep their proprietary desks in a speculative mode? A 3% funds rate can help Main Street and the Fed would still be accommodating. The Fed continues to lack confidence that their policy will work.
Noticeably absent were comments that the housing sector continues to show signs of improvement. How could they with existing-home sales down 17% and with new-home sales down 7.6% to their lowest level since this series began in 1963? With new-home sales down 23% in 2009, the housing market is clearly deteriorating, and bad loans are rising at community and regional banks. These are the real problems that appear to plague any chance of a gradual economic recovery.
The decline in the 10-Year yield is overdone on its daily chart with the 50-day simple moving average providing resistance at 3.57. Risk aversion continues with weekly closes richer than my semiannual pivot at 3.675. Yields are up overnight with the 10-Year on the cusp of 3.675 with the 21-day at 3.73.
The key pivot for today’s $32 billion in 7-Year notes is 3.11, and a continued risk aversion is signaled by a close today below the 200-day simple moving average at 3.03. The 7-Year is cheaper than 3.11 overnight, which could be a problem for this auction. The 21-day is support at 3.23.
Comex Gold continues to hold a zone of support with quarterly at $1084.9, the December 22 low at $1075.2 and weekly support at $1062.0. My annual pivot is $1115.2.
Nymex Crude Oil is oversold on its daily chart with the 200-day simple moving average as support at $69.75 and weekly and annual resistances at $76.22 and $77.05.
The Dollar Index is above its 200-day simple moving average at $78.60 for the first time since May 8. My quarterly resistance is $80.23. The support for the euro is the 200-week at 1.3857.
For the Dow Industrial Average I'm tracking the 21-day and 50-day simple moving averages as resistances at 10,514 and 10,449 as a negative crossover appears on the horizon. That would be the first negative configuration by this measure since July 2009. Today’s support is 10,037 with my annual pivot as resistance at 10,379.
The China 25 Fund (FXI) is well below its 200-day simple moving average at $40.27 and this index had been above this milestone since April 29. My annual pivot is $39.25, and a close this week below the 200-week at $38.64 is the next bearish signal.
The Housing Sector Index (HGX) is between its 200-day at $96.20 and the 50-day at $102.22.
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