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Fed shakes thing up, but little change

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It was a bit of a Wild Wednesday as the anticipation of the FOMC meeting minutes, and the reaction, sent stocks moving in both directions before settling about where they started. The Dow lost 3-points while the S&P and small caps posted very minor gains.

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The rally before the minutes were released was possibly a result of program trading and the emotional reaction to it because as we know, the Fed tends to not disappoint the market. But when the minutes revealed no back down from a potential June rate hike, there was a negative response.

The indices did show some resiliency as the Fed minutes could have sent the indices reeling and breaking down from the head and shoulders patterns we see on many of the charts, but instead they held up above the necklines by the close. So, the bears were willing to sell the rally, but the bulls put up a fight near support and we're back where we started the day.

The S&P 500 (C-Fund) closed yesterday about where it closed on Tuesday although both the bulls and the bears were thrown some meat to chew on, but neither could make any headway. As I have been saying, the head and shoulders patterns can break either way depending on the trend of the market. It's possible that it is a topping pattern, but being a continuation pattern with the prior trend being up, a case can be made that this will break to the upside. Investors are on both sides of the fence on this one and I wouldn't trust anyone who thinks they definitely know which way it will break. I have my theories, but so do thousands of other folks out there. This may be one of those times where, whichever way it breaks, we need to give it a few days before trusting that direction.




The DWCPF (S-fund) was up slightly and sits about where it was the day before. It is now below the 50 and 200-day EMA's but not by much on the 50-day, so I'd say it's limbo with a nod to the bears. But they have had opportunities to push this down and have not been able to do so yet, so don't count the bulls out yet.




The Nasdaq 100 (QQQ) was one of the indices that has lagged and it is now clinging to a rising support line after falling below the 50 and 200-day EMAs.




The dollar rallied strongly on the Fed minutes and the UUP moved above the 50-day EMA for the first time since early March, where it failed. The strength in the dollar had a negative impact on commodities, which put some pressure on some stocks, but it also pushed yields up helping many financial stocks.




Oil was up earlier but that spike in the dollar pushed it into negative territory by the close.




The AGG (Bonds / F-fund) was down sharply as the yields spiked up and we saw a pretty nasty breakdown below the support levels that we have been watching. It is now the 50-day EMA that it is leaning on. I suspect that this was an emotional overreaction and I wouldn't be surprised to see bonds try to make their way back up in the coming days.




Read more in today's TSP Talk Plus Report. We post more charts, indicators and analysis, plus discuss the allocations of the TSP and ETF Systems. For more information on how to gain access and a list of the benefits of being a subscriber, please go to: www.tsptalk.com/plus.php

Thanks for reading. We'll see you back here tomorrow.

Tom Crowley


Posted daily at www.tsptalk.com/comments.php

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S&P500 (C Fund) (delayed)

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DWCPF (S Fund) (delayed)

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EFA (I Fund) (delayed)

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BND (F Fund) (delayed)

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