After two days of regularly scheduled FOMC meetings, the Federal Reserve released a statement this afternoon indicating that the U.S. economy is doing better (i.e. “moderate growth”) and labor market conditions are showing signs of improvement, but the unemployment rate remains “elevated”. The Fed observed that household spending and business fixed investment advanced, and the housing sector has strengthened further, but fiscal policy has now become more restrictive. According to the Fed, inflation is running “somewhat below the Committee’s longer-run objective” and longer-term inflation expectations remain “stable”. And best of all worlds for stock market bulls, the Fed stated the following:
“To support a stronger economic recovery and to help ensure that inflation, over time, is at the rate most consistent with its dual mandate, the Committee decided to continue purchasing additional agency mortgage-backed securities at a pace of $40 billion per month and longer-term Treasury securities at a pace of $45 billion per month.”
Here are today’s closing marks, with changes from Tuesday’s close:
Wednesday’s Closing Prices
Dow Jones Industrial Average 14,511.73 +55.91 +0.39%
S&P 500 Index 1,558.71 +10.37 +0.67%
NASDAQ Composite Index 3,254.19 +25.09 +0.78%
Russell 2000 Index 951.95 + 9.10 +0.97%
Dow Jones Transportation Average 6,218.19 - 21.65 - 0.35%
Quite frankly, I am not sure it gets any better for the stock market bulls than today’s post-FOMC statement from the Federal Reserve. According to the Fed, the economy is showing moderate growth, inflation is subdued, the labor market is improving, housing is on an uptick, and business investment looks solid. And despite all these plus signs, the Fed is STILL going to buy $85 billion worth of bonds per month for as far as the eye can see (to infinity and beyond). When I read the Fed’s statement just after its 2:00 PM ET release, I thought for sure most major U.S. stock market indexes would surge higher into the NY 4:00 PM ET Close. Yes, stocks advanced, but the advance was tentative, at best, and there was actually profit-taking near the final bell. All we can say for sure is that most short-sellers lost again today as advancing issues outpaced declining issues by almost 3 : 1.
Bottom Line: Despite a negative earnings report after the close today from Oracle, and earlier negative earnings surprises from Caterpillar and Federal Express, I don’t think the S&P 500 Index will just roll over and die tomorrow. In fact, I think it is much more likely that shorts get squeezed again as buyers take control following a soft predicted NYSE opening. I also think the S&P 500 will then advance towards its record intra-day high (1,576.10) at one point between now and Friday’s close. The bears may point to today’s losing day in the Dow Jones Transportation Average as tangible evidence that the end is near, and well they should. From my computer trading system, a rare preliminary monthly chart sell signal was triggered today in Fedex (FDX) and a preliminary weekly chart sell signal was triggered in UPS. These longer term signals are usually very reliable. However, I still think the all-time record high in the S&P 500 needs to be broken before a sustained downturn can begin. My next major turn date is either Friday, 3/22 or Monday, 3/25. And one of the best anniversary dates ever is coming up this weekend. March 24th was the day the S&P 500 peaked in the year 2,000. The 30-month bear market that followed cut the S&P 500 in half, while the NASDAQ Composite lost an incredible 78% as the dot com bubble burst. Nothing as dramatic is predicted here for the next bear market, but the bears will soon have their time (if they have any money left).
 |
| Federal Express (FDX) Monthly Bar Chart with Computer-generated Buy & Sell Signals |
 |
| UPS Weekly Bar Chart with Computer-generated Buy & Sell Signals |
No comments:
Post a Comment