Can the earning this season maintain it’s lustre and can this actually propel the markets to their new all-time high?
European markets and U.S. futures are trading lower after the Fed debated the hike interest rate more aggressively. But before we go into further detail with that, there is something more important to discuss.
Can the earning this season maintain it’s lustre and can this actually propel the markets to their new all-time high?. This is the question which traders are asking themselves because if this factor cannot help the rally, then it is arduous to lean on any other factors. As everything else is lacking energy and the only single hope is that perhaps earning season can help the U.S. to another record high.
Having said this, the FOMC minutes released last night had an important message and this may help the markets to step towards the record high. So far, there has been a lot of fear and fuss about the Fed hiking the interest rate by 25 basis points (which they have done three times this year). The minutes showed that the Fed is actually wary of the economy running too hot and hence this new idea has circulated that the Fed may actually start to raise the interest rate by 50 basis points instead of 25 basis point.
This is what we think; if the Fed increased the interest rate by 25 basis points in December, it is likely that the market actually celebrates that news rather than being pessimistic. The reason is this that the comparison now is not between no interest rate hike or 25 basis points instead it is between 25 basis points or 50 basis points. So a bad news may actually become good news.
Another interesting angle over here is the relationship between the Fed and president Trump. He has called the Fed “crazy”. Perhaps, the Fed actually decided to show the president what does the word “crazy” really mean after all.
Naturally, the trade behind the FOMC event is to go long on the dollar index and we already have seen that the dollar index has surged. But, we do believe that the bulls are in a better position and the dollar index would continue to rally.
Gold Could Be A Good Buy
The yellow metal lost a lot of strength because of the message which the FOMC minutes delivered. When the debate is that how high you can push the interest rate; it is going to leave a negative scar on the gold price in the short term. However, there are higher chances of miscalculation here hence we do think that any drop in the gold price could be an opportunity.
Bitcoin- Capitulation Going To Place
Capitulation is strongly on the cards when it comes to Bitcoin. The daily range has been so narrow for the past few days that it has stunned the crypto-fanatics. Everyone is waiting for the breakout whether that is to the downside or to the upside. Since September 21st, we have not seen any trend developing at all. This feeling is tedious and not like bitcoin at all. However, it is important to say and be on the record, that any pullback in Bitcoin could be a huge opportunity because we do think that the regulatory landscape is becoming more favourable now. I think November is going to be a very important month for cryptocurrencies.
