Wednesday, December 17, 2014

SPX 2-Minute Chart Fed Creates Strong Stock Market Rally

Fed Chair Yellen creates a bullish orgy this afternoon in the stock market with her dovish words. The 'considerable time' statement remains in the Fed text so that provides the green light to a continuing accomodative Fed and easy money (low rates) as far as the eye can see. The central bankers are the market. The following text describes the action in real-time including the rigged markets that moved five minutes ahead of time once the insider traders were provided the Fed information before everyone else. This information is for educational and entertainment purposes only. Do not invest based on anything you read or view here. Consult your financial advisor before making any investment decision.

Fed Rally 12/17/14
The Fed decision is imminent at 2 PM EST. The SPX is up 21 points, +1.1%, to 1994. The Dow is up 150 points, +0.9%, to 17220. The Nadsaq is up 42 points, +0.9%, to 4590. The RUT gains 16 points, up +1.4%, to 1156, but is starting to leak quickly lower. Dollar/yen 117.56. Euro 1.2407. Pound 1.5633. VIX 21.48. Gold 1196. Silver 15.98. Copper recovers to 2.87. Oil is off the intraday highs. WTIC oil 57.60. Brent oil 62.19. 10-year yield 2.11%.

The FOMC meeting is the last of the year. Traders are focused on whether or not the “considerable time period (for accommodative rates)” statement is changed. If Fed Chair Yellen flaps her dovish wings, the statement will be left as is and stocks will rally. If the “considerable time” statement changes to a date certain in Q1 or Q2 for the first rate hike, then stocks will sell off. Even if the statement remains as is, traders may lose confidence in the Fed since a June-July 2015 target is expected for the first rate hike and if it is now delayed until late 2015 or 2016, the Fed’s grand six-year Keynesian experiment may be exposed as a failure.

The Fed probably does not want to rock the boat and delay the first rate hike but instead will hike rates far more slowly in smaller increments. The Fed is rightfully concerned over a credibility problem if they reverse course and delay the expected start of rate hikes in June-July 2015. Interestingly, if the global and European deflation comes to roost in the US in 2015, the Fed may be forced to delay the first rate hike thereby creating the credibility problem. Fed Chair Yellen realizes that the greatest threats to the US economy are European economic weakness, global deflation (lower commodity and oil prices) and geopolitics (Russia, Ukraine and Middle East).

One minute and seconds before the announcement, the Dow launches higher up 170 points, 180 points and accelerates up 200 points. The SPX rockets higher up 26 points then quickly up 30 points. Obviously, the insider traders and HFT robots see the information before everyone else. It’s another crooked day on Wall Street the evidence is plain as the nose on your face.

At 2 PM EST, the Fed punts. The FOMC leaves the “considerable time” statement in as a footnote and in the main text says “the committee can be patient” and adds that this new ‘patient statement’ is consistent with the old phrase of “considerable time”. The bottom line is the Fed leaves the considerable time statement in and stocks explode higher. The Dow is up nearly +300 points on the knee jerk reaction so the insider traders and HFT traders are immediately profitable. The VIX drops under 20.

The Fed expects inflation to move back up to +2% as labor conditions improve. The Fed does not mention the overseas geopolitical problems. Oddly, the words ‘Russia’, ‘Europe’ and ‘oil’ are not mentioned in the Fed statement. The committee says they will “monitor inflation developments closely.” The change to “patient” downplays the Fed’s commitment to the timing of the first rate hike. There must be dissention among the members since the considerable time statement was not removed. Three members dissented on the statement.

The decision is extremely dovish since if June-July was slated for the first rate hike, this target now moves the hike to late summer or Fall 2015. If considerable time was removed that would have projected about a six-month period until the first rate hike verifying the June-July timeframe but instead the Fed balked. Low interest rates means the easy money ride continues and stocks rally large. Fed Chair Yellen flaps her dovish wings flying above the journalists that are ready to provide softball questions at the press conference.

The SPX catapults higher up 36 points, +1.8%, to 2009 above the 50-day MA at 2003. The Dow is up 261 points, +1.5%, to 17330 above the 50-day MA at 17285. The Nadsaq is up a big 73 points, +1.6%, to 4621 above the 50-day MA at 4586. The RUT gains an enormous 23 points, up +2.1%, to 1164 above the 50 and 200-day MA’s targeting the 20-day MA at 1169. US dollar index 88.28. Dollar/yen 117.49. Euro 1.245. Pound 1.568. The VIX is 20.61. Gold 1196. Silver 15.91. Copper 2.88. WTIC oil 57.22. Brent oil 61.80. 10-year yield 2.11%. Financials explode higher. XLF is up +1.7% to 24.10. Energy continues to rally with the top seven stocks in the S&P 500 all oil-related. XLE +4.4%. Investor Bob Doll suggests buying risk assets due to the dovish Fed.

At 2:30 PM, Fed Chair Yellen walks across the stage, sits behind a mahogany desk and begins the press conference by reading prepared remarks. Yellen waxes concern over folks that are unemployed and underemployed but the same rhetoric is spoken month after month year after year without any change. Yellen says the new language in the statement “is not a change to policy” which will maintain buoyancy in the stock rally (the Fed does not plan to raise rates for a long time). The Fed says the words were changed to reflect a better economy wanting to have it both ways.

Fed members project the unemployment rate to drop to 5.2%-5.3% at the end of next year. Yellen says the “lower oil prices will hold down inflation.” She says “a rate hike is unlikely for the next couple meetings” which places the possibility for the first hike firmly into Q2 or later. Yellen says the “patient” wording should be interpreted that it is not likely that a rate hike will occur for at least a couple of meetings. The wind comes out of the stock market sails since the rate hike now appears back on the table for the April-July 2015 period dampening the exuberant dovish mood after the statement was released about 45 minutes ago. The SPX drops under 2K to 1998. The Dow is at 17281. Stocks remain strongly higher but off the highs.

Yellen takes Q&A and discourages talk of having a press conference at every Fed meeting saying the current schedule will remain in place with quarterly news conferences. The dollar/yen is higher to 118.32 as the US dollar index moves higher above 88.8. The tape remains jumpy. Stocks lose the gains and are down where they were minutes before the announcement losing all the dovish energy. SPX 1997. VIX is marching higher again to 21.26. Yellen says the deflationary effects with lower oil are transitory and inflation will move higher in the months ahead. The Fed is out of touch considering that oil is down -50%, cut in half, since summer time; that is quite a ‘transitory’ move. What would a strong trend move look like? Yellen ignores any negative effects in high-yield bonds due to the tumbling oil prices.

Yellen delivers the dovish goods planning to remain accommodative with low rates. Stocks begin moving higher as the Q & A session continues. The SPX is sticky at the 50-day MA at 2002-2003. Yellen says the members are attentive to global developments. Oil reverses the intraday rally with WTIC down to 55.89 and Brent at 60.44. The video feed from Fed Chair Yellen’s press conference goes dead for a couple minutes at 3 PM EST. Stocks leak lower.

At 3:01 PM, SPX 1993. INDU 17213. Nasdaq sits directly on the psychological 4600. RUT 1163. VIX 21.45. The US dollar index moves above 89.

At 3:07 PM, the SPX is up 23 points. The Dow is up 172 points. The Nasdaq is up 59 points. WTIC oil 56.12. Brent oil 60.76. Financials remain buoyant with XLF up +1.4% which will keep stocks elevated into the closing bell.

Yellen says the Russian problems will not impact the US economy or markets which creates a thrust higher in stocks. She is encouraged by the housing market so her dovish and optimistic talk sends stocks higher as the press conference ends at 3:30 PM.

The SPX is up 39 points to the highs, +2%, to 2011. The Dow is up 286 points, +1.7%, to 17355. The Nasdaq is up 90 points, +2%, to 4638. The RUT gains 32 points, +2.8%, to 1171. The VIX is 20.08. The tape remains jumpy. Stocks catapulted higher on the 2 PM statement then completely gave up all gains at 3 PM then in the final one-half hour of the news conference; especially after saying Russia is not a worry, stocks leap back to the highs.

Stocks float higher into the closing bell. Yellen appears unconcerned about geopolitics and at the same time willing to keep rates low indefinitely since the considerable time statement remains in the Fed text. The “patient” phrase is dovish. Low rates means plenty of liquidity and stocks rocket higher. The Dow is up over 300 points. The SPX is up over 40 points. The Nasdaq is up over 100 points. All Hail the Fed! Rates will stay low for a “considerable time.” Nothing has changed.

Stocks double their gains after the Fed meeting. Yellen, Queen of the Doves, creates a robust stock market rally. The central bankers are the market. The day ends with the SPX up 40 points, the best point gain in three years, +2%, to 2013. The Dow is up 288 points, +1.7%, to 17357. The Nadsaq is up 96 points, +2.1%, to 4644. The RUT gains a huge 35 points, +3.1%, to 1175.

For the complete chronology of today's global market action as always reference Keystone the Scribe website.

Note Added 7:09 AM EST on Thursday morning, 12/18/14: The Fed Aftermath continues with a cascading global rally to Asia and to Europe and US futures are strongly higher. S&P +22. Dow +190.

Further clarification and commentary on the Fed's theatrics;

The Fed keeps the “considerable time” phrase in the FOMC statement that references when the first rate hike will occur. This creates a huge stock market rally in the US since the Fed is in no hurry to raise rates. At the same time, the Fed adds a “patience” statement that originates from Fed Greenspan’s days which typically means the first rate hike will occur in six months which is June-July 2015. Further, in the Q&A session, Fed Chair Yellen says the FOMC will not raise rates for the next couple meetings and clarifies to say ‘couple’ means ‘two’. This opens the door for an April 2015 rate hike earlier than the consensus expects.

The Fed wants it both ways. The bottom line is that the Fed left the considerable time phrase in the statement so that negates the April to June target for the rate hike and maintains the ongoing projection that the rate hike will occur from June-July 2015 or later and creates the stock market rally. The Fed tried to use worlds to create a hawkish tone but by balking at removing the considerable time statement is instead professing ongoing dovishness. The confusion will continue into the next meeting on 1/27/15 and 1/28/15 where traders will be watching to see if the considerable time phrase is completely removed or not. When considerable time is removed the first rate hike is definitely on tap in six months or sooner.

The central bankers control the markets. This is what modern day capitalism has descended into; a group of Fed members dictating the ongoing directional moves in markets. It is absolutely shameful. The free market principal has become a joke. The Fed has nine meetings scheduled for 2015 the first in January, then 3/17-18/15, then 4/28-29/15, then 6/23-24/15. Yellen says the first rate hike would not occur for two meetings which targets 4/29/15 as the first potential date for a rate hike but as explained above, the market expects summer 2015 or later which creates an ongoing bid in the stock market.

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