November 19, 2015
Mish's Daily
By Mish Schneider
As I have been writing about rivers and flounder, the FDA Thursday, approved genetically modified salmon. The FDA stated “no biologically relevant differences in the nutritional profile of AquAdvantage Salmon compared to that of other farm-raised Atlantic salmon."
Note the language, “compared to that of other farm-raised Atlantic Salmon.” Genetically modified is equal to farm-raised. How do those Frankenfish then, compare to the natural Salmon swimming in Alaskan waters?
The Federal Reserve “floundered” on exactly where monetary policy is heading. The FOMC minutes stated that they might raise rates in December if they need to. However, if they have to keep rates close to zero, then they will also explore other ways to provide additional monetary policy accommodation.
Go with me here.
If monetary policy, beginning with Bernanke, can be compared to farm-raised Salmon (Quantitative Easing), and recent comments of exploring additional accommodations can be compared to genetically-modified salmon (more stimulus), what are the implications of how far we have strayed from eating salmon au natural (letting the economic chips fall where they may)?
Thursday, the House passed a bill to “audit the Fed.” Their justification is that greater transparency and greater accountability is necessary.
My intention is not to take a side. Rather, I hope to elucidate how modifying or not modifying how the FED does its business might impact the market.
In response to the House, Yellen wrote, “The bill would severely impair the Federal Reserve’s ability to carry out its congressional mandate and would be a grave mistake, detrimental to the economy and the American people.”
The critics of genetically modified salmon approved by a government agency meant to be independent-(the FDA) and the critics of auditing the Fed, another agency meant to be independent share similarities.
Critics of an audit state that one will politicize the Fed’s decision-making process. Those in favor of an audit voice concerns that the Fed’s policy of pumping money into the system will lead to high inflation.
The Fed has stated implicitly that they will raise rates as soon as they believe inflation will hit a target of 2%.
Critics of an audit also state that should the government require one that holds them accountable for their interest rates decisions, it would impede the Fed’s ability to fight recessions.
Those in favor of an audit say that transparency by the Fed will help families’ better plan for the future.
Critics of modified salmon worry that if one genetically modified salmon escapes into the wild, it could cause the decimation of the natural salmon population.
The market will most likely worry that if an already divisive Congress enforces using a mathematical rule to set Fed and interest rate policy, instability (ok maybe not total decimation) will occur.
The Fed maintains that opening up its deliberations to public scrutiny will “politicize” its decision making process.
I am reading that the President will probably veto the bill regardless. So tell me, where is any of this (and the market) not political?
Bottom line-once one screws with the natural order of things, events, policy, fish-whatever-one cannot be surprised at any cause/effect.
S&P 500 (SPY) 213 big resistance and now 207 big support
Russell 2000 (IWM) Inside day. Confirmed phase change back to recovery with 114.75 pivotal, and 116.76 overhead resistance
Dow (DIA) Until we see the Terror at 18k resolve, this looks like a good rally to overhead resistance
Nasdaq (QQQ) 112.80 pivotal and over 115.47 takes it to new highs
Volatility Index (VIX) Closed green. Also has two inside days. Could give best clues depending upon which way the range breaks
XLF (Financials) If holds 24.25 good and must clear 24.97
KRE (Regional Banks) 44.80 pivotal 45.21 good to clear with 46 even better
SMH (Semiconductors) Got the move over 54.22 and now 56.36 is the biggest area to clear if rally is to continue
IYT (Transportation) 145.30 pivotal and 150 the big overhead resistance
IBB (Biotechnology) 340 resistance, 329 pivotal and 349 big guns 200 DMA
XRT (Retail) Maybe a great double bottom. Need more evidence of that
ITB (US Home Construction) Confirmed a breakout but I would have liked to see a close over 28.00
GLD (Gold Trust) Would not say this is a bottom but more of a relief rally
SLV (Silver) Weak reversal pattern
GDX (Gold Miners) I like it-especially if holds 13.58 now
USO (US Oil Fund) not that much interest for me right here
TAN (Guggenheim Solar Energy) Broke 26.00 Vulnerable
TLT (iShares 20+ Year Treasuries) Gap higher and now has some real overhead resistance between 121-122
UUP (Dollar Bull) 2 doji days turned into a sell-off
RSX (Russia) Inside day under the 200 DMA-interesting
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