The Federal Reserve's Open Market Committee meets this coming Tuesday and Wednesday, March 15th and March 16th. Almost everyone on Wall Street expects a "quiet" Fed in terms of monetary policy. In this case, "quiet" means no rate hike for now and unchanged rhetoric from the Fed suggesting several 1/4-point rate hikes before year-end 2016. Of course, no one believed the Fed in January when it said there would be several more rate hikes between now and year-end, and no one believes them now. The Street expects only one or two 1/4-point rate hikes between now and year-end 2016. Most expect only one, and some pundits actually think there will be NONE!
My view here is that the Federal Reserve will not shock the financial markets with a 1/4-point rate hike this week (although the probability is NOT zero), but instead the Fed will change the tone of its post-meeting communique to suggest aggressively that a 1/4-point rate hike will come much sooner than Wall Street currently anticipates, perhaps as early as April 27th following the next FOMC meeting in late April.
This week's "unfriendly" rhetoric from the Fed and also in upcoming speeches from Federal Reserve officials WILL SHOCK the financial markets.
In the chart below, the NY Composite Index has rebounded an incredible 13.0% since February 11, 2016, but it is still down 10.2% from its all-time record high as posted on May 21, 2015. The current rebound is likely to find formidable resistance at its 50% retracement point (right here at Friday's closing price), a 10-month downtrend line, and its 162-day moving average line.
The price of Gold is now 5 trading days off its recent rally high, which suggests there may be short-term top in this closely watched asset that is sometimes very sensitive to market liquidity. As mentioned in my last column, I sense the early stages of a "liquidity squeeze" which will soon send U.S. stocks tumbling.
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| NY Composite Index Daily Chart with Trend Lines and 162-Day Moving Average Line |
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