Major market averages were up yesterday on higher volume with the S&P 500 closing above its 50-day moving average to join the NASDAQ Composite which has closed above its 50-day moving average for three straight days.
New Federal Reserve Chairperson Janet Yellen testified Tuesday, saying she would continue to stay the course that the Fed under Bernanke's leadership had set, and that tapering would depend on the direction the economy takes. She stressed that unemployment is still too high and that rates would be kept at current levels well beyond an unemployment rate of 6.5%. She said the unemployment rate is not the best gauge of the health of the labor market as workers out of a job for more than six months continue to make up an “unusually large” fraction of the unemployed and that many people working part time would prefer full-time jobs.
As for the Fed's continued tapering, she felt the recent weakness in the market was due not to tapering but to issues in China, Argentina, and Turkey. “Unlike last summer, there was little change in expectations regarding U.S. monetary policy during this time,” the Fed said.
That said, markets are forward looking so they may have used China, Argentina, and Turkey as an excuse to sell off when the underlying reason was realization that the QE party may come to a close by the end of this year.
Gold miners have been well outperforming gold bullion over the last several weeks. The Market Vectors Gold Miner ETF (GDX) had another pocket pivot yesterday, inching it closer to 200-day moving average resistance. That said, the GDX recently undercut lows in the 22-23 area and is bouncing strongly, implying the possibility it has found a floor. Gold and silver, meanwhile, are bouncing weakly, thus will gold miners pull up gold bullion, or will gold bullion pull down gold miners? We will continue to monitor both sectors closely for an answer.