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Nerves in front of the Fed

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Investors showed some nerves in front of today's FOMC meeting and probable rate hike. The Dow lost 44-points on the day but once again we are seeing some buying into the close so the dip are out there. They just weren't being very enthusiastic the day before the Fed meeting.

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The Fed is expected to announce a rate hike after today's FOMC meeting. The announcement should come about 2 PM ET and the fireworks will start. The Fed has had a tendency to do or say what the market has wanted to hear, but now that we've had a big rally over the last 4-months, is it possible that they could change their tune? That would be a problem. Investors are expecting up to 3 rate hikes this year, but could they use the strong jobs report and recent stock market gains as an excuse to get more hawkish?

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The SPY (S&P 500 / C-fund) is making one of those "h" formations that I dislike, but the repeated closes above the lows and the repeated closes above the 20-day EMA still gives the nod to the bulls here. It wouldn't take much to change that, and the question is whether the Fed plans to give it a reason.

The DWCPF (S-fund) has been struggling, and the Russell 2000 has actually moved into negative territory for the year after the March pullback. The S-fund is still hanging in there with a respectable gain for the year but this chart is flirting with some important support at the 50-day EMA. Like the S&P, you can see that the DWCPF has been closing well off the lows over the last few days so the dip buyers are still lurking.

The Dow Transportation Index posted another nasty pullback yesterday losing 1.4% on the day. It's now solidly below the 50-day EMA and flirting with the 2017 rising support line. If this bull market is going to resume, this would be a good place for the Transports to catch a bid, and it may be oil that is going to decide that.

The price of oil was down again and it has been falling hard since breaking down from the highs a week or two ago. As we mentioned yesterday, it could be an oversupply issue rather than an economic issue, and that would certainly be welcomed by investors.

The EFA (I-fund) dipped below that wedge we have followed for weeks, but it remains near recent highs.

The AGG (bonds / F-fund) posted a small gain. Bonds look bad but may be due for a little short-term relief rally.

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

Tom Crowley

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S&P 500 (C Fund)
DWCPF (S Fund)
Dow Jones U.S. Completion Total Stock Market Index (^DWCPF)
EFA (I Fund)
iShares MSCI EAFE Index (EFA)
AGG (F Fund)
iShares Lehman Aggregate Bond (AGG)