Psyops and the FOMC

I’ve made no secret of the fact that I expect a rate hike in September.  Investors are weary of the drip, drip, drip of slightly higher indices, and SPX is very much in need of a backtest of the critical Fib at 2138.  In fact, I’ve had a 2138 target on Sep 12 ever since August 19 [see: The Big Picture.]

We’ve talked about the importance to the Fed of maintaining a high US dollar.  It’s been painfully obvious from all DX’s stick saves over the past two weeks.  2016-09-09-dx-60-0545Without a high dollar, we’d have more noticeable inflation.  More noticeable inflation would raise too many inconvenient questions about the Fed’s easy money policy — which has been sold as the very solution to low inflation (as readers have known for years, its real purpose is to re-inflate asset prices.)

That’s why a September rate increase which prompts a temporary decline to backtest 2138 — the biggest decline since Brexit at a whopping (sarc) 2.5% — makes so much sense.

Or…is that simply what the Fed is trying to have investors believe?  We all know about open market operations; what about psychological operations?  With the US dollar back above its resistance zone through jawboning alone, is an increase still necessary?  What if SPX reaches 2138 today?

2016-09-09-spx-60-0615

We remain short from Wednesday afternoon.

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