No Backbone… No Clue

yellenYesterday morning, we titled our daily post with the rhetorical question: “has the Fed found its backbone?”

After 7 years of currency, interest rate and stock market manipulation, is the Fed finally ready to let the “markets” find their own equilibrium and hazard even a 0.25% increase in interest rates?  Apparently not.

From the rearrangement of the dots, we can surmise that the FOMC has become, if anything, more cautious regarding the forward outlook.  Rate increases will likely be later and lower than last forecast.  Our outlook remains that the increase will be minimal or, more likely, non-existent in 2015.

Surprisingly, even the mainstream media is starting to pick up on the “Fed backed into a corner” narrative.   See this INTERVIEW, which aired on CNBC of all places.

The S&P 500 loved this news, and bounced nicely where/when we expected.  Yesterday morning, we suggested a short at 2103.64 (2103.67 was the high) and covering at 2095.61 for conservative traders and the SMA100 (2089) for more aggressive types.

2015-06-18 SPX 60 0600

These proved to be the correct turning points, which were followed by an algo-driven melt-up into the close as expected.

Remember, at least 75% of the time, FOMC announcements/press conferences have led to a frenzy of algo activity that drives prices higher into the close.  It’s part of the “FOMC has got our back” meme that investors have come to accept/expect.

The algo was of the crude oil futures variety, with a 3.6% spike from yesterday’s lows through last night’s ramp job which has left the eminis 6.50 points higher a few minutes before the cash open this morning — despite USDJPY’s continuing slump.

2015-06-18 CL 15 0600

Where to from here?

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