Fed Comments Help To Settle Global Market Expectations

The recent Fed comments should have helped settle the global market expectations related to if and when the Fed will start raising rates and/or taking further steps to curb inflation trends. 

Additionally, the Fed has been telegraphing its intentions very clearly over the past few months, providing ample time for traders and investors to alter their approach to pending monetary tightening actions. Read the full Fed Statement here.

In my opinion, foreign markets are more likely to see increased risks and declining price trends for two reasons. 

First, at risk nations/borrowers struggle to reduce debt levels. 

Second, foreign market traders/investors struggle to adapt to the transition away from speculative “growth” trends. 

I think the U.S. Dollar may continue to show strength over the next 4+ months as the foreign traders pile into U.S. economic strength while the Fed initiates their tightening actions.

So it makes sense to me that global markets would recoil from Fed tightening while debt-heavy corporations/nations seek relief from rising debt obligations....Continue Reading Here.

Phil Flynn: Shanghai Surprise

Did China’s surprise interest rate increase rebalance what seemed to be an out of balance global economy? Will this interest rate increase take the heat off the Chinese who are under increasing US pressure to set their currency free? China crushed the runaway commodity complex when it raised its benchmark deposit and lending rates by 0.25 percentage point yesterday for the first time since December 2007. The move was to stem domestic inflation but it could be the first of a series of rate increases could also be seen as a move gesturing to the US for our restraint by not declaring them a currency manipulator.

In the real world a currency that is allowed to float would normally increase the value of its currency. The Chinese, by raising interest rates, it was almost like a de facto increase in the value of their currency. By doing that it raised worries that even a slight slowing in the Chinese economy could slow the growth of neighbors and the uncertainty surrounding their next move improved the value of our beaten down greenback. It also reduced the price of commodities that threatened to derail the global economic recovery. We all know that the US is pressuring China to increase the value on their yuan and that commodities have......Read the entire article.


Get a FREE Trend Analysis For Chinese ETF....FXI. Just Click Here!

Share

Phil Flynn: You Don’t Believe We Are On The Eve Of Demand Destruction

Tell me over and over and over again my friend! You don’t belive we are on the eve of demand destruction! The last time I honored the 1965 Barry Maguire classic “Eve of Destruction”, oil was hurling towards $147 a barrel and I said that there is no way that this rapid rise would not cause demand destruction and damage to the economy. What followed was the biggest drop in demand in the history of the global oil markets. Now with concerns of another slowdown in the economy, is it possible that demand could crash again?

Ok it is not only the Fed worried about a slowdown in the economy, it seems that the International Energy Agency is as well. The Fed helped bail out oil bulls to a certain extent when they said they would reinvest principal payments on mortgage assets the central bank holds into U.S. treasuries in an effort to keep historically low borrowing rates historically low. I know it sounds ironic. The Fed is concerned that growth has slowed in recent months and fears that "the pace of economic recovery is likely to be more modest in the near term than had been anticipated.....Read the entire article.



Share

Phil Flynn: Go Ahead and Make my Day

Go ahead and make my day. Commodity prices explode in what really shouldn’t be called trading, it should be called tainting. One day after paying all “due respect” to the Federal Reserve the dollar tanked and the commodities rallied almost trash talking the Federal Reserve and daring them to do something about it. I know what you’re thinking, did the Fed cut rates 4 times or was it five? In fact in all the excitement I kind of forgot myself.

I guess the question is: does the Fed feel lucky? Well do ya punk? The commodity markets are confident that the Fed is powerless at this point and does not have the courage to challenge the dollar. Everyone knows that the Fed can’t raise rates and the Fed will keep the target range for the federal funds rate at 0 to 1/4. The fact is the market does not believe the Fed has the courage to even hint at an exit strategy. Go ahead, keep printing money.....Read the entire article

What are you waiting for....Here is 10 FREE Trading Lessons!

Crude Oil Trades Higher On Weaker Dollar, Fed Announcement Day

Crude is trading higher benefiting from a weakening dollar and the SP 500 showing strength typical of a Fed interest rate announcement day.

June crude oil was higher overnight hinting that the two day correction off last Friday's high might be ending. Stochastics and the RSI are neutral to bullish hinting that a short term low might be in or is near.

Closes above the 20 day moving average crossing at 51.55 are needed to confirm that a short term low has been posted.

If June renews this month's decline, the reaction low crossing at 45.11 is the next downside target.

Wednesday's pivot point, our line in the sand is 49.32

First resistance is the 20 day moving average crossing at 51.55.
Second resistance is the reaction high crossing at 53.21.

First support is last Tuesday's low crossing at 46.72.
Second support is the reaction low crossing at 45.11.

----------------------------------------------------------------------------------

The June Dollar was lower overnight signaling that a two day short covering bounce off last Friday's low has likely ended. Stochastics and the RSI remain bearish signaling that sideways to lower prices are possible near term.

If June extends last Friday's decline, the reaction low crossing at 84.10 is the next downside target. Closes above the 10 day moving average crossing at 85.88 would temper the near term bearish outlook in the market.

First resistance is the 20 day moving average crossing at 85.60.
Second resistance is the 10 day moving average crossing at 85.88.

First support is last Friday's low crossing at 84.63.
Second support is the reaction low crossing at 84.10.

----------------------------------------------------------------------------------

The June S&P 500 index was higher overnight as it consolidates above the 10 day moving average crossing at 852.96. Stochastics and the RSI are diverging and are turning neutral warning bulls that a short term top and possible trend change might be near.

Closes below the 20 day moving average crossing at 843.86 are needed to confirm that a short term top has been posted. If June extends the rally off March's low, January's high crossing at 937.00 is the next upside target.

Wednesday's pivot point, our line in the sand is 851

First resistance is the reaction high crossing at 867.00.
Second resistance is January's high crossing at 937.00.

First support is the 20 day moving average crossing at 843.86.
Second support is the reaction low crossing at 823.10.

The June S&P 500 Index was up 8.20 points. at 860.00 as of 5:57 AM CST. Overnight action sets the stage for a higher opening by the June S&P 500 index when the day session begins later this morning.

----------------------------------------------------------------------------------

Key Market Events To Watch For Wednesday............

10:30 AM ET.

Apr 24 US Energy Dept Oil Inventories

Crude Oil Stocks (previous 370.6M)

Crude Oil Stocks (Net Change) (expected +2.3M; previous +3.85M)

Gasoline Stocks (previous 217.3M)

Gasoline Stocks (Net Change) (expected -300K; previous +802K)

Distillate Stocks (previous 142.3M)

Distillate Stocks (Net Change) (expected +200K; previous +2.68M)

Refinery Usage (expected 83.4%; previous 83.4%)


Two-Day FOMC Meeting continues; interest rate decision expected around 2:15 p.m. EDT


-