Once again the fed sent a not so great message with her refusal to raise rates. She not only refused to raise a whopping quarter of a percent now but she said she may not raise when they meet again in December. We're talking a simple quarter of a percent yet she's refusing to even think about raising rates and that's a very bad message to send to the market world. She's saying she's scared because she doesn't at all like what she thinks is taking place globally and that she doesn't see any hope for the immediate future.
She says it much more elegantly than I do in her statement so as to not scare folks but her actions she speak very loudly and the market knows what it means. It's no surprise the market didn't love her statement initially. It surely didn't matter it in the end. If the leader of the financial world doesn't like what she's seeing then we have to step back and recognize that a global slow down is the real deal and worse yet , there's no real hope here. A simple quarter of a percent is too risky? That's just inconceivable to me. After 3 qe programs and other global attempts to create wealth, we're going backwards. Qe has not and never will work. It's a failed concept. Money to banks that never sees consumers hands is a massive waste of time. People won't take chances on new ventures in an ever weakening economic environment. Add in how tough it is to get any loans and the economy sits still or declines. Give folks cash in the mail. Lower and middle class cash and tax breaks will stimulate the economy over night. Not to be folks. So the fed told us the United States is in decline. She also told us she doesn't really like what she's seeing for the future. You have to wonder why the market would love this. Nothing bad today. The market did just fine after imploding lower initially. The bad message sent traders to the sell button but after roughly thirty to forty minutes the buyers stepped back in. Solid action despite the bad message. Head down market for the moment.
The banks rallied hard on the hope that some of her thoughts today focused on the possibility of a rate hike in December. Rotation is really what took place in order to prevent the market from falling too far too fast. The market always finds hope when it needs to and since the banks are heavily weighted the money simply found a place to go that would keep the market from falling precipitously. The banks can rescue the market for the short term but will need everyone to participate over time to get us over 2134 and get the market rocking on its last leg up. The rest of the market held just fine and considering how well it actually did, imagine what would have occurred had she raised rates. The fed is always interested in helping the banks for that's where the funds sit to stimulate the economy. Her first thought has always been with the banks and today's message of a possible rate hike in December, although I don't think it will happen, gave them their boost. That language of a possible rate hike in December was just fodder to keep those stocks rocking and the market as well.
As the market continues to come off its lows we're seeing the pessimism start to wane. That's normal behavior since we're once again trending a bit higher and bulls are naturally frothy. The bull bear spread was recently minus 10% but is now positive 14%. A 24% reversal in not long a period of time. If the market goes to the old highs and a bit above we'll see the bull bear hit 25% plus. Doesn't take long and that's a neutral number for sure. Once pessimism is out of the way the market will trade mostly on technical's and that's not good news for the bulls since any new high will create those nasty negative divergences. We'll deal with that over time but for now the pessimism is still there enough to favor the bulls. Slowly but gradually declining in its positive effect but still good.
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Peace,
Jack Steiman
Robert New
