The opinions expressed below are my own and do not necessarily represent those of Visdom Investment Group, LLC.
The Fed disappoints
Premarket futures rallied until news of Israel bombing a natural gas field broke, followed by some hotter CPI data. S&P futures went from +30 to -30 in a matter of minutes. The index opened down about 20 points and lost value slowly over the day. The FOMC changed nothing, as expected, and the only material change in the released statement was as follows:
“The implications of developments in the Middle East for the U.S. economy are uncertain.”
The usual risk-off price-actions continued during the press conference. Stocks slid, bonds slid, the Dollar climbed, precious metals slid.
The Fed communicated that it is going to wait and see and that it has no inclination to act preemptively. The markets didn’t recoil in horror as a result but it was disappointed. Apparently, the market was hoping the Fed might have a bias. Maybe equity markets were hoping for an easing lean while bonds were hoping for a tightening lean. Both ended up disappointed with a neutral communication. I’m not sure the markets should have reacted negatively to a Fed that rightly states that this situation *looks* to be short-term and so any Fed response should come afterward, when evidence of *some* particular economic reaction can be observed.
Maybe investors, after a night’s rest, will realize that the Fed’s response was the proper one.
With the Fed on hold, markets can go back to watching the Middle East. Positive news is lacking and time still favors the bears. The S&P is nearing in on the 200-day moving average (6615) and the chart-watchers are primed to act and react as we trade near that level.
The dip-buyers have historically enjoyed buying at, or below, the 200-day. But the bears love it when it breaks, because even if the market *eventually* returns to the old highs, the dip after a big break, can be a big one.
See you tomorrow.
-Mike
Visdom Market Commentary
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