COMMENT ON THE FOMC MEETING (5:00 pm EDST)
Today the Fed raised interest rates 0.75 percentage points as expected. The DOW was up a bit until the 2:00 announcement of the rate hike, and then it suddenly dropped several hundred points. Jerome Powell's press conference following the announcement at first seemed to alleviate market fears, and the DOW surged back up over 400 points into the 3:00 hour. But as it became clear that Mr. Powell was holding strong to hawkish policy, the DOW plummeted again to close the day with a 522 point loss.
It seems that Mr. Powell could have softened his hawkish rhetoric to avoid a market sell-off, but he did not. This is not looking good for equities as this market is very nervous and vulnerable to panic selling right now. Our cycle analysis has also shown that this market's current trend is looking bearish. Our bullish divergence signal from yesterday was negated today as the NASDAQ made a new weekly low. Nevertheless, we are now at the center of a strong general reversal zone. A bottom could still form this week or early next and be followed by some sort of rally, although that rally may now be short and weak. The alternative to a reversal would be a major panic and breakdown in equity markets. That scenario is starting to look possible. Let's stay on the sidelines and wait to see if today's sell-off continues over the next few days or if the market can regain its confidence by the end of the week.
The Fed's hawkish rhetoric was good for the U.S. Dollar Index as it boosted the greenback to a new 20 year high - breaking and closing above its recent 110.79 high. Gold and silver prices also rose a bit today, perhaps demonstrating that investors will flee to both the U.S. dollar AND the precious metals if they fear a sell-off in equities. I suspect, however, that if we have a major sell-off, most investors would turn to the greenback as a safe-haven - just as they did during the 2008 -2009 crash.
Today the Fed raised interest rates 0.75 percentage points as expected. The DOW was up a bit until the 2:00 announcement of the rate hike, and then it suddenly dropped several hundred points. Jerome Powell's press conference following the announcement at first seemed to alleviate market fears, and the DOW surged back up over 400 points into the 3:00 hour. But as it became clear that Mr. Powell was holding strong to hawkish policy, the DOW plummeted again to close the day with a 522 point loss.
It seems that Mr. Powell could have softened his hawkish rhetoric to avoid a market sell-off, but he did not. This is not looking good for equities as this market is very nervous and vulnerable to panic selling right now. Our cycle analysis has also shown that this market's current trend is looking bearish. Our bullish divergence signal from yesterday was negated today as the NASDAQ made a new weekly low. Nevertheless, we are now at the center of a strong general reversal zone. A bottom could still form this week or early next and be followed by some sort of rally, although that rally may now be short and weak. The alternative to a reversal would be a major panic and breakdown in equity markets. That scenario is starting to look possible. Let's stay on the sidelines and wait to see if today's sell-off continues over the next few days or if the market can regain its confidence by the end of the week.
The Fed's hawkish rhetoric was good for the U.S. Dollar Index as it boosted the greenback to a new 20 year high - breaking and closing above its recent 110.79 high. Gold and silver prices also rose a bit today, perhaps demonstrating that investors will flee to both the U.S. dollar AND the precious metals if they fear a sell-off in equities. I suspect, however, that if we have a major sell-off, most investors would turn to the greenback as a safe-haven - just as they did during the 2008 -2009 crash.
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