As Harry Nilsson sang in “Everybody ‘s Talkin'”: Everybody ‘s talking at me, I don’t hear a word they’re saying, only the echoes of my mind.” This is true of the words from St. Louis Fed President James Bullard as he had the audacity to opine in the middle of Friday’s S&P and equity rout that: 1. “The Fed doesn’t react directly to equity markets”; and 2. “More sanguine than market on global outlook, China.” (source: Bloomberg). This is the very same James Bullard who is credited with halting the significant break in the SPOOS on October 15 when he mentioned that “the Fed should be open to continue its QE on the back of low inflation expectations.”
Well, Mr. Bullard, if you thought inflation expectations were low last October how do you respond to the recent lackluster wage gains and the six-year low in the CRB commodity index? There is a lot of talking emanating from the Fed members but very little worth hearing. It behooves Janet Yellen to assert her Chairmanship and quiet her “teaching assistants.” If the dissonance continues one must wonder if the FED is looking to provoke market chaos to take the fluff out of the equity markets but that will then leave the fluff in the BOND markets as investors buy more bonds driving yields in Treasuries lower and elevating the risk level of all debt instruments.
***Last week I advised that the global stock markets were acting in sync to trade below their 200-day moving averages. The missing pieces on a weekly close basis were the DAX, SPOOS, Nasdaq and CAC. Each one did settle below the 200-day on Friday but he Nikkei barely breached the level and it was when Japan had already closed for the weekend. (The Nikkei priced in YEN terms has the 200-day at 19,089 on CQG daily continuation.) Be attentive to this level as a possible correction point for the global equity markets. After being caught in the doldrums we got dynamic moves last week. Pay attention to all the surrounding resistance levels for the yen and euro, especially the GOLD, to get a sense of any corrective rally after last weeks value decimation.