A $12.5 trillion savings glut shows there's still fear in the markets: trader
By Alan Valdes, Director of Floor operations at Silverbear
Volume yesterday was down over 20% from a month ago, which is not unusual for late August. It always seems that during these summer months we are waiting for some event to possibly move the market. First it was Brexit, next came earnings, always monthly jobs, and let’s not forget Fed chatter, etc. This week is no different. Today we got “GREAT” new home sales: 654,000 vs 580,000 estimate, which is an eight year high, with sales up 12.4%.
Friday, Fed Chair Janet Yellen gives us her take on the state of rates from Jackson Hole, Wyoming. Meanwhile, there is still a lot of fear out there overhanging the market. We see that in the Federal Reserve Board numbers of savings accounts as of August: The public is hoarding $12.5 trillion in accounts that pay little or no interest, thereby, keeping the bond market all tied up. The Fed really has little room to move, and I am still looking for a December Hike!
Oil, which broke above $50 a barrel last week, is now back trading around $47.00. August has been good to oil (up 20% so far for this month), which could be expected with summer driving time here in the US. Remember, back in July, we were trading at $42.00 a barrel. But I don’t believe we will see oil traded much out of this $40.00 to $50.00 range anytime soon. September gasoline prices normally come in at the pump as demand subsides. I don’t put too much credence in “freeze talks” from Saudi Arabia and Russia. It usually turns out to be just that … Talk.
The fear factor will likely keep the Fed in check. But once this starts to fade, expect to see this market continue its unprecedented move to the upside. In the mean time, expect volume to remain quiet and volatility to continue.
