Thursday, August 18, 2016

Watch Out For Yellen's Speech Next Week, Traders Off Balance

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*FOMC minutes today reported what the Fed thought on July 27th.
*Since then there was one monster jobs report August 5th which they did not yet know about.
*That's why the minutes read dovish.
*Yellen however, can sound hawkish in comparison next Friday and rattle markets.
Our key takeaway from the FOMC minutes released today is that they can keep traders off-balance going into Fed Chair Yellen's speech on Friday August 26th. These minutes read dovish (as we expected here and here). But this week's NY Fed Pres Dudley's hawkish comments probably find there way into Fed Chair Yellen's speech next week. That should rattle markets (NYSEARCA:SPY). With that all said chances are slim the Fed hikes rates before the elections unless the next jobs number is another monster.
These minutes reflect the Fed's view July 27th. Dovish
"Many judged that it was appropriate to wait for additional information." (Page 11 of PDF)
From that you have enough gridlock to say that the Fed isn't going to move.
Yellen's Speech August 26th Can Be Hawkish Opposite These Minutes
Since these minutes you had one blow out jobs number.
Look at what they said about jobs in the minutes.
"[May and June's combined jobs] pace was noticeably slower than the average rate during 2015 and the first quarter of 2016." (PDF Page 9)
Since they said that they had one more monster jobs report so don't get thrown off by these minutes. In fact that last jobs number was faster than the recent trends, not slower like they called out in the minutes.
They did not know about that last 255 (above) when that had the meeting that these minutes represent.
Since then, this week, NY Fed Pres and FOMC Vice-Chair, second to Fed Chair Yellen told Fox Business News the jobs market was "tightening" and that a rate hike for September was a "possibility."
He also said in his interview that these jobs numbers are a main determinate to drive rate decisions.
That all tells us that the dovish FOMC minutes will keep traders off balance. They could get a surprise when the Fed Chair Yellen reflects some of the Fed Vice-Chair's more hawkish comments next week.

Chaim Siegel has been working with hedge funds and mutual funds as an analyst and PM his entire career. Chaim specializes in earnings and predicts, analyzes and reacts to earnings and earnings events as well as developing current company stories with a hedge fund perspective. If you want his analysis real time sign up to the right for real time email alerts. #in, $spy, $qqq, $iwm, $vxx, $ycs, $fxe, $EUO, $YCS, ^GSPC, INDEXSP:.INX, #elazaradvisorsllc, CME Globex: ES Disclosure: These trades can lose you money and principal especially when using leverage BY USING THIS SITE YOU AGREE TO TAKE ALL RESPONSIBILITY FOR YOUR OUTCOMES AND LOSSES AND HOLD BESTIDEAS, ITS CONTRIBUTORS AND ELAZAR ADVISORS, LLC HARMLESS

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