Here’s the news of the week – and how we see it here at Mcalvany Wealth Management:

Sorry Ben: The Turning-Back Point Was 1913.

The Fed-induced buying craze in stocks would have continued unabated this week if not for a few taps on the brakes to slow things down. U.S. Housing data, released Wednesday, showed that starts fell 8.5% from December to January (structures with at least two units fell 24%). Given the hype that preceded the data, bulls were expecting much more, but in classic form and with $45.6 billion in loose change from the Fed this week, stocks at least managed to stay firm.

The bravado temporarily faded with the release of the FOMC minutes later that day, wherein Fed officials reiterated their concern over inflation and possible intention to discontinue QE sometime in the near future – regardless of previously stated employment goals. That fear was soon rightly dismissed, and by Friday stocks were back to their relentless ascent. Stock investors glommed onto any news that would permit more runaway speculation. In this case, the excuse was strengthening German business confidence, now at a 10-month high – incestuously matching the 10-month high seen in the German DAX. In the end, stocks finished the week with modest losses, both in the U.S. and overseas. Treasuries and the dollar rallied to weekly highs, while the metals were sold to interim lows (see the box scores).

As for the metals, it’s apparent that we’ve seen some forced or panic selling following the break below the major moving averages. Though not encouraging from a gain/loss perspective, it is exactly the kind of selling that would mark the end of a technical breakdown. With that in mind, it is safe to say that the bottom may have been reached and that the metals can now stage a decent recovery. The only caveat we would issue at this time is that stocks, the recent nemesis to the metals, may have a little more time to party before the ongoing slide in economic conditions and the incurable Congressional “sequester” (due March 1st) take away the proverbial punchbowl.

Best regards,

David Burgess
VP Investment Management