Yesterday, the FOMC released an edict in which it declared it was making no changes to interest rate policy. The markets fell on the news, because partly there was a vibe before the open that the Fed was forced to recognize that there has been inflation and would have to say something about that.
Jerome Powell spoke all over the place in his press conference afterwards, saying that the Fed is now watching inflation, but still expects inflation to go back down before the end of the year, claiming that the CPI will go down like lumber prices recently have, but that in the future they will have to reduce its QE bond buying program and raise rates one day. When he did not say, but some of the TV commentators made a big deal of the fact that the medium Fed prediction has pushed the next rate cut closer into the future – towards the end of next year.
In 2018, when the FOMC started to get more hawkish about raising rates and reducing QE the S&P 500 fell 20%. When we get to the moment that they are closer to do those things again another correction is likely to play out, but that isn’t starting this week or this month or likely next month. It’s still way out in the future.
Right now there is nothing happening. The US market yesterday dipped, but when you look at the charts nothing really happened.
For instance take a look at the Russell 2000 ETF IWM, as it is a good example of what is now happening in the markets.
Wednesday’s drop in IWM meant nothing.
Since February the IWM ETF has been going sideways while Bitcoin rolled over and the ARKK ETF dumped close to 40%.
I watch that ETF closely, because it is made up of many of the popular fad stocks that a lot of Robinhood traders own.
This selling in crypto collectible coins and fad stocks has gotten a lot of attention, but the broad market as a whole hasn’t fallen.
The XLE ETF made a new high on Tuesday.
The S&P 500 and DOW have been doing better than the Russell, but are also in a position to go into a sideways phase now for weeks if not months with shrinking volatility.
I showed the reasons and charts that make me think that on Monday in a post here.
When the averages are in a range with shrinking volatility it actually becomes hard to make money trying to trade them.
It’s easier to try to just focus on a few sectors or stocks.
One in position that I don’t own is energy stock OXY.
OXY had a nice jump in volume as it broke out of a small triangle consolidation pattern. More importantly it is in the energy sector, which has become a top performing sector so far this year.
Finally, yesterday gold fell down below $1850 and is now causing panic selling in many this morning, but still just looks like it is in a short-term correction/consolidation to me too.
Silver still looks like it is positioning to breakout ahead of gold sometime soon too, even though it is also down today.