As expected, the Federal Open Market Committee (FOMC) today did not release any surprises to the public in its statement this afternoon summarizing the results of its two day meeting. QE tapering will continue on schedule with another 10 billion dollar bond purchasing reduction, and, most importantly, the Fed made it clear that interest rates are not going to rise any time soon. The text of the FOMC statement says that:
" ...it likely will be appropriate to maintain the current target range (i.e near zero) for the federal funds rate for a considerable time after the asset purchase program ends."
In other words, low interest rates will likely continue past the end of this year when the QE program is supposed to end. The FOMC further states 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 long run."
Wall Street cheered the dovish tone of this statement with a 45 point rise in the DOW, but neither the DOW nor the S&P 500 have taken out their all-time April 4 highs yet. Nevertheless, significant bullish signals appeared in the DOW and S&P 500 charts today and directional momentum in both of these indices is now 100% bullish. Because of this (as well as today's thumbs up to Wall Street from the Fed) I am going to cover my short position in the broad stock market for tomorrow. The DOW and S&P 500 closed slightly above where they were last Thursday when I short sold this market so we should be able to get out with minimal or no loss. Even if this market turns down now, I suspect the correction will be minimal and followed by a rally into the third week of May at which time we may see the start of a very significant correction of 10% or more into the summer. Because the markets are closed now, I am going to put an order in tonight to cover my short position at the opening of tomorrow's market. Covering all short positions in the broad stock market for tomorrow morning (Thursday).
Gold and silver dropped significantly today (especially silver) and technical signals in the charts of both metals are looking quite bearish (more so for silver) right now. If prices don't turn up soon, gold and silver could be headed for new lows into the end of May. Directional momentum is currently mixed bullish and bearish for gold but 100% bearish for silver. Still on the sidelines.
Crude oil prices briefly touched $102 yesterday, but crude's 100% bullish directional momentum has made me reluctant to sell this market short (even though cycle analysis is suggesting a significant correction by early June).
There is fairly strong support at the $99 level. $97 is also a very important support level which if broken could send prices quite a bit lower. I would still like to see more bearish momentum in crude charts before committing strongly to a short position. On the sidelines for now.