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Stocks started the day out slowly, and for some reason we saw sharp selling into the FOMC policy statement announcement. We know the Fed usually has the market's back, so that was strange. Then of course the Fed delivered their work, and stocks went bonkers - straight up, then straight down. The Dow lost 142-points but it was another wide trading range.

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I took a screenshot of a 15-minute chart of the S&P 500 futures to show the move more dramatically. This is what happens when a Fed, who had already turned from very hawkish to dovish, turns very dovish. The trend eventually prevailed, meaning what the market was doing before the Fed announcement, resumed. And even after hours (this goes through 5 PM ET) the selling continued.




Back in December when the Fed was on a rate hiking mission, the market begged it to stop saying it was going to continue to raise rates, and get more data dependent. And it did just that, and stocks went from plummeting to soaring over the next two plus months. If you recall they were saying 2 to 4 rate hikes in 2019. Now, after yesterday's statement, they are going to basically guarantee no rate hikes for the rest of the year - and maybe one in 2020. That's actually a pretty bullish sign for stocks, but again stocks did slide on the day.

Look what happened to the yield on the 10-year Treasury Note - a new 52-week low at 2.525%, so bond prices and the F-fund rallied sharply. The dollar also plummeted.




Tech stocks, particularly the big FANG type stocks, rallied hard on this new pro-growth stance from the Fed, but the bank and financials didn't like it so much with the XLF down 2%.




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The S&P 500 (C-fund) fell sharply early on Wednesday and actually penetrated below that 2815 level that the world is watching, and what I said must hold. It did hit 2812 at the lows of the day but of course the Fed took care of that. Is it smooth sailing now or will stocks resume a little pullback, which it seemed to be trying to do before the Fed stepped in?




The DWCPF (S-fund) was hit hard again and broke down from a small rising channel. Nothing serious here yet, but that 200-day EMA needs to hold if there's any more downside.




The Dow Transportation Index took it on the chin again with FedEx and UPS dropping yesterday, but it also rallied off the lows after the Fed statement. It is now back below the 200 and 50-day EMAs - a warning sign, technically




The EFA (I-fund) got a lot of help from a big drop in the dollar yesterday, but it was still technically a negative outside reversal day, and one of those spinning top formations was created.




The dollar fell below that rising channel that we've been watching (blue) but it also tested the bottom of another rising parallel channel (red).




The AGG (F-fund) rallied sharply when the Fed put the breaks on rate hikes and said inflation is not a concern. That's quite a breakout and I must say, the bond market was all over this hawk to dove change in the Fed when yields peaked in November, and bond prices bottomed.




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

Tom Crowley


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