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All Eyes on FOMC and Bank of Japan

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The Dow gave up another early 100+ point gain yesterday as investors remain nervous in front of today's FOMC policy statement and Janet Yellen's press conference. The nervousness is understandable, but it's interesting that we saw two triple digit gains in early trading the last two days. The Dow ended with a gain of just 10-points, the S&P was flat again, and small caps were down.

Daily TSP Funds Return



The Fed is one story as the odds favor no rate today but a good chance of one by the December meeting, so anything different, or any clues to anything else, will have a big impact on the market. Surprisingly, the Bank of Japan may be as big of a story as they consider more stimulus Wednesday and that should also impact the dollar, and hence the stock and bond markets, quite a bit.

The SPY (S&P 500 / C-Fund) hasn't traded in quite as wide of a range that we saw last week but it still has the bear flag flavor to it. Normally bear flags break down, but we know the Fed could change that, or compound it, we don't know. Will they raise? Will the hold? Will they suggest a December hike is inevitable or will they say it is still data dependent? The answers should determine the way this breaks. Volume was extremely light again.




The DWCPF (small caps) held above the 50-day EMA for a 3rd straight day but our normal rules of 3 to 5 closes can probably be disregarded because of the Fed and bank of Japan coming actions, or lag there of.




The Dow Transportation Index has been in a more bullish pattern over the last few months, but the short-term has not escaped the bearish flag formations that we have been seeing on many stock and bond charts.




The EFA (I-fund) managed to close back above the 50-day EMA yesterday and the 200-day EMA has held again, but like everything else, all that could change with any surprises from the Fed and BOJ.




The AGG (Bonds / F-fund) remains in a bear flag like the stock index charts, and also has an open gap above like the S&P, small caps, and EFA chart. It's an interesting set up since we had been used to bonds moving in the opposite direction as stocks over the years, but lately that has not been the case.




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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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