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The charts, graphs and comments in my Trading Blog represent my technical analysis and observations of a variety of world markets...
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Friday, September 25, 2015

Fed "Double-Talk"

Just to add to confusion regarding what future direction the FOMC may take regarding whether or not to raise interest rates in 2015, we see this tweet last night...



I would just remind readers that Janet Yellen's comments last night are HER comments and are NOT the official Fed Policy Statement that was released at their last meeting on September 17th. In their Release, they stated that...

"Recent global economic and financial developments may restrain economic activity somewhat and are likely to put further downward pressure on inflation in the near term."           


AND...

"To support continued progress toward maximum employment and price stability, the Committee today reaffirmed its view that the current 0 to 1/4 percent target range for the federal funds rate remains appropriate. In determining how long to  maintain this target range, the Committee will assess progress--both realized and expected--toward its objectives of maximum employment and 2 percent inflation. This assessment will take into account a wide range of information, including measures of labor market conditions, indicators of inflation pressures and inflation expectations, and readings on financial and international developments. The Committee anticipates that it will be appropriate to raise the target range for the federal funds rate when it has seen some further improvement in the labor market and is reasonably confident that inflation will move back to its 2 percent objective over the medium term."

AND...

"The Committee currently anticipates that, even after employment and inflation are near mandate-consistent levels, economic conditions may, for some time, warrant keeping the target federal funds rate below levels the Committee views as normal in the longer run."

In my opinion, regardless of what Janet Yellen or any other FOMC member (or media pundit) may say in between their last Fed meeting and the next one, the only one that could be considered the official FOMC policy at the moment, is the one stated in their last meeting.

Thursday, September 17, 2015

What Is The Fed REALLY Saying?

Is the Fed really saying that their present economic monetary policy dictates that they treat current economic conditions like they had to in March of 2009 (re: their decision today to leave Fed Funds Rate unchanged at zero to 1/4 percent)?

If so, then what does that say about the health of U.S. banks? Does that mean they're at the same stress levels as they were in 2009?

If so, then one could rationally conclude that the S&P 500 Index should not be trading 1,323 points higher than it was at the March 2009 lows, as shown on the Monthly chart of the SPX below.


The message I'm seeing on the following Monthly ratio chart of SPX:VIX indicates that the current fear level of market participants equals that experienced back in April of 2011, when the SPX was trading at 1364 before it tumbled to 1074 and, eventually, rallied steadily  to reach all-time highs earlier this year.


CONCLUSIONS:

Both, today's message from the Fed and information on the SPX:VIX ratio chart, are telling me that the current valuation of the SPX (at 1990) is far above where it should be. My comments (and subsequent UPDATES) noted in this previous post regarding the SPX:VIX ratio still apply and are worth monitoring over the coming days and weeks.

* Tweeted by BNN's Andrew McCreath September 18th:


Sunday, September 06, 2015

Will Markets Take On More Risk?

The following 1-Year Daily comparison chart has the Dow 30 plotted on as the baseline. You can see that the SPX, NDX & RUT have, for the most part, outperformed the Dow this year.

We'll see if market participants are willing to keep buying into riskier assets in the NDX and RUT (since they're currently outpacing the SPX), or whether money will start flowing back into the larger-cap stocks.

My own feeling is that if (big) money starts fleeing the NDX and RUT (risk), we could, finally, see the SPX and Dow (and other world markets) follow...especially, emerging markets, Japan and China. So, I'd watch for any signs of fresh, large-scale dumping of "risk" on this comparison chart.


With the VIX currently elevated and sitting just above major support (the zone between 20.00 and 25.00), we could, very well, see some large-scale risk-dumping occur (with continued wild, volatile price swings) before markets settle down (when the VIX falls back below 20.00).


Saturday, September 05, 2015

Will Japan & China Lead Markets Back Up?

How strong is Japanese influence on U.S. markets?

Will the Shanghai Index regain strength on Monday?

Without U.S. markets opening until Tuesday, we may see an attempt by Japan's Nikkei Index and China's Shanghai Index to bounce somewhat. It may not become clear until Tuesday's close as to the potential strength of any sustainable rally in these Indices, along with the S&P 500 Index. Furthermore, there are quite a lot of economic reports being released on Monday for Japan and China, which may influence Tuesday's trading.

I'd keep a close eye on these three Indices, along with the USD:JPY forex pair, which have all traded lock-step (as shown on the following 1-Year Daily comparison chart), as to which direction the next (sustainable) breakout will occur.