Stocks a Little Shaky As Dollar Plummets, Silver, Gold Soar

Chalk this up to various theories of unintended consequences.

Even the brilliant thinkers at the Federal Reserve are unable to explain the strange divergence of bonds and the dollar over the past number of weeks because that's not the way it's supposed to go.

With the Fed becoming more hawkish as they attempt to unwind literally trillions of dollars worth of bonds on their vast balance sheet, interest rates have risen, but the value of the dollar in relation to other major currencies has taken a noticeable hit, not just in the past few weeks, but for the better part of the past year.

The mighty US dollar was beaten like a trailer park hooker, down nearly one percent on the day per the dollar index, which, in the forex universe, is a pretty severe move.

Other currencies were the beneficiaries of the dollar demise, with the British pound up 2.4%, Japan's yen up nearly one percent, and the Aussie dollar gaining 0.90%.

Fueled by Treasury Secretary Steven Mnuchin's comments at the World Economic Forum in Davos, Switzerland, that a weaker dollar was good for US trade, currency pairs were traded with one thing in mind: dollar dumping.

Bonds, however, failed to play along, with the 10-year benchmark unchanged at 2.65% and both long and short-dated maturities moving less than a basis point.

Besides the currencies of nations not the United States, commodities were bid large, with WTI oil futures making another in a series of three-year highs and precious metals continuing a rally that began in December but had recently stalled.

Not so today, as silver led the way with a gain of over three percent, topping out at 17.70, the highest since breaking briefly over $18 per ounce in early September of 2017. From a technical perspective, silver has ripped through a long, declining resistance line dating back to its peak in 2011. A clear breakout holding above $17.50 would be a significant development for the world's most unappreciated asset.

Gold was also well-taken, finishing in New York up $16.80 (1.50%), at $1358.70 the ounce.

Stocks meandered along the unchanged line, ending split, with the Dow higher while the NASDAQ and S&P fell.

With many pension funds chartered to rebalance by month's end, the rapid rise of equities in the early days of the new year may be coming to a quick conclusion. Estimates range from $12 to $120 billion of stocks which must be sold and converted to bonds in the next week. If that's the case, it will take a concerted effort from the central bank cartel (who also may be selling into the weakness) to keep the stock bubble adequately inflated.

If there's a downside other than stocks taking a much-needed shave, it's that any decline in the stock market will be blamed on President Trump and his administration's tough currency and trade policies.

The President is set to address the assemblage at Davos on Friday, concluding this year's fete of economic manipulators and would-be statist social constructionists.

The President is expected to deliver remarks touting America's re-emergence as the world's greatest economic force.

At the Close, Wednesday, January 24, 2018:
Dow: 26,252.12, +41.31 (0.16%)
S&P 500: 2,837.54, -1.59 (-0.06%)
NASDAQ: 7,415.06, -45.23 (-0.61%)