The market is pricing in a dovish Janet Yellen but with new voting members on the Fed and facing the Republican led House she is going to be more of a lonesome dove. As the Fed Chairwomen gets ready for her first testimony in front of the House Financial Services Committee the market is betting early she won’t let her dovish credentials down. We see gold popping and dollar falling and the Euro is getting slap happy. Even oil is above the century mark in part because Janet is expected to stay the course.
At the same time she will try to stress that she plans to stay the course on the taper. But Beware! If Janet decides to sound hawkish the markets could have a sharp reversal. The Republicans will hammer her on anemic job growth and the upcoming oxymoron: whether or not the Fed can continue to taper as the jobless rate falls and the jobs growth is terrible. Is it possible that Job creation is being held back by Obamacare or the weather? With the overall unemployment rate falling to 6.6% will a continuing drop force the fed to speed up the pace of removing extraordinary stimuli?
At the same time the questions will surround the Fed’s 4 trillion dollar balance sheet of bonds and mortgage backed securities and try to explain what they are going to do with them. With the reduction of the balance sheet will the Fed start to pop Fed Bubbles? We have already seen that the taper is not tightening is nonsense. For every action there is going to be a reaction. The great taper has taken its toll on the emerging market as we have seen shivers from Turkey to China, Brazil and Argentina just to name a few. While it may warm up next week, this week heating oil went on an incredible rise. After surging Friday we pulled back. Yet we should see a bounce back today. While it may warm up next week, this week the weather is cold and supplies that are already at the lowest level in 10 years will fall further. We hit a key support and held! Rebound Time.
Natural gas on the other hand looks like it is not quite ready to rebound. Despite the Cold weather there is hope that moderating temperatures will minimize the possibility of freeze offs and production could rise.
Gasoline is all about refining maintenance and the possibility that demand might rise after you find your car under the snow.