Initial Impressions

As mentioned yesterday, even a statement that is exactly the same as the last, has the power to move the market from where we are now. The last statement did move the market to the upside... However, was the last statement the one that created a top and distribution? In other words, while smart money may have very well let retail get excited, it appears smart money had a different take on the last policy statement. If this one isn't that much different and institutional money has removed the support for the market in to the brief strength that followed and then the very volatile and choppy "toppy" market, what would that mean for the market now?

Here are some charts showing what I mean as they probably do a better job than what I just wrote.

 The last policy statement was here, note market action following it. Also notice the left side of a trend line I have had drawn on the SPY chart for sometime, I didn't move this, it's been there for some time.

 Now moving forward from the statement to the present, talk about a protracted initial knee jerk reaction and then the true take-away from Wall Street! Note that very same trendline from the last policy statement has acted as support, it is also the level in which the market broke major local support and then the 50-day moving average. Note where we are now, almost EXACTLY where we were when the last F_O_M_C policy statement was released!

 The same on the daily chart, support at the green arrow in the same area as the previous policy statement.

Just trying to get a feel for the mid-term trend since the last policy statement on, a 15 min leading negative divergence. It "appears" Wall Street may have fostered the notion of the last policy statement being implicitly QE positive, albeit through only subtle wording. Is Bernie taking a page out of the "Greenspeak" book? Remember the days Alan could talk for hours and you still had no idea what he was thinking?

I find the above interesting.

As for the policy statement today, initial reaction was muted, we are seeing some upward volatility in the 3 major averages, but on very low volume, compared to the initial muted action, the difference in volume is notable.

As to the policy statement itself,

1) FED SAYS ECONOMY `EXPANDING MODERATELY'
2) FED SAYS INFLATION `HAS PICKED UP SOMEWHAT' ON ENERGY
3) FED SAYS GROWTH TO STAY MODERATE, `THEN TO PICK UP GRADUALLY'
4) LACKER DISSENTS FROM FOMC DECISION
5) FED SEES `SIGNIFICANT DOWNSIDE RISKS'
6) FED SEES `EXCEPTIONALLY LOW' RATES AT LEAST THROUGH LATE 2014




There seems to be an acknowledgement that labor conditions are not as good as they were.


Thy added "despite some signs of improvement" housing remains depressed.


The part on inflation changed from "Subdued in recent months" to "inflation has picked up" blaming oil and gas.


Expectations with regard to oil/gas inflation- They seem to make a point to recognize the inflation in 
oil/gas, but also to point out it is transitory and not effecting longer term expectations.


As to economic growth, the change is subtle, again seemingly acknowledging the recent bad economic data, but again hinting it is transitory in saying, "GROWTH TO STAY MODERATE, `THEN TO PICK UP GRADUALLY'


Notably the part about "Strains in the global financial markets have eased" has been removed entirely, leaving only that it now poses significant threats. It seems the F_E_D see what has been clear to everyone else regarding Europe and China.


Another point is made that oil/gas inflation is in their view, transitory.


"Likely to warrant EXCEPTIONALLY low levels in the F_E_D funds rate" was added "through 2014. 


Is the F_E_D once again behind the curve? Have they looked at the Surprise Economic Index lately? Are they waiting for a significant downturn? Or have they simply realized QE has not been effective as we are way behind where we should be at this point in a post recession recovery judged against all post recession recoveries since World War 2?


This chart of GLD is the initial reaction to no hints at extending operation Twist and a lack of QE3 language...

 What has happened since? 


30 Year Treasuries also plunged, but have recently stabilized.


Realize that what was said at the F_O_M_C policy meeting is not public information, this is where the true thoughts of the F_E_D rest, we won't see that until 2017.


You could say, "The F_E_D met for 2 days and all I got was this lousy policy statement!"


The market really isn't doing anything extraordinary, it' time to look very closely at the underlying action. I suspect there's a brief "hold your fire" period in effect until Bernie gives his presser.