September 20, 2015
Weekly Market Outlook
By Keith Schneider
For a brief moment (almost an half hour) right after the Fed’s announcement that the monetary spigots will be left wide open, the markets seemed to love it with the Dow Industrial’s up almost 200 points. After a brief realty check, the equity markets gave back almost 300 points by the end of the day and proceeded to shed another 300 points or so by the close of Friday, down 65 points on the day. For the week, all US Stock indexes ended down about 1%. Not a good performance considering the Fed decision was meant to give the economy more time and gas money to get up to its targeted inflation rate of 2%. Good news, and bad price action.
This reminds me of the days when simple jetted carburetors ran a ca’rs fuel mixtures before electronic fuel injection became the norm. Carburetors were set for a certain altitude and a change to a much higher altitude would starve the car for oxygen (too much gas) and slow it down regardless of how much we pressed the gas pedal. In fact pressing harder on the gas had a negative or no effect by pouring more gas into an already oxygen deprived engine. The higher we climbed the more we slowed no matter that we had the gas pedal floored. This occurred on a cross country trip we made for summer break from school in New York to the Rockies, and until we figured that out that keeping the gas pedal floored was a negative and that only descending to a lower altitude would restore the cars performance, we traversed the Rocky’s slowly.
This week’s market reaction to the Fed decision that it can’t even raise rates just .25% could mean that the market finally figured out that the Fed might be stuck with us in the middle. It seems obvious that keeping the monetary gas pedal essentially floored is not resulting more in growth or the desired inflation rate. Can the Plunge Protection team and Central Banks around the world keep markets stable? The key number to watch now is the September calendar range high in the SPY. For that number and other critical chart points let’s go to this week's video.
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