Rusty Market Musings » FOMC

29/04/2009 GDP ignored. Shall we trust efficient-market hypothesis?

LtPinback — Wed, 29 Apr 2009 23:24:55 +0000

General move today was very similar to yesterday’s but around 10 point higher and without so much choppiness. A new high since mid January was printed at 882.06 but the close was at 873.64. Volume was average.

S&P 500 Index 5min Chart

S&P 500 SPDRs 5min Chart

Q1 GDP was worst than expected but the market data-mined a need to rebuild inventories out of the data and spun it as positive. FOMC said the economic outlook had improved modestly since its last meeting in March.
On the technical side, the new high must follow trough quickly or it may end up prompting a retracement phase due to rally exhaustion. This was the third testing of the 870-880 resistance range since the March lows and the fifth since the beginning of the year.

S&P 500 Index Daily Chart

Mixed day with Financial Sector profit taking

LtPinback — Thu, 19 Mar 2009 22:21:21 +0000

The day started with a quick sell off of yesterday’s FOMC rally followed by surprisingly strong consolidation action in the 780-790 range and ending in a strongly fought battle to take down the 780 support level that ultimately was unsuccessful. The CBOE Volatility Index (VIX) surged 9.0% ahead of the triple witching Friday. Volume was high.

S&P 500 Index 5min Chart

S&P 500 SPDRs 5min Chart

A mixed day with substantial strength in the Energy and Materials Sectors due to commodity prices increasing as US Dollar declines and profit taking in the Financial Sector. Prices held quite well and volume indicates that a lot of consolidation took place. S&P 500 50 Day SMA is still resistance. GE did a 5 hours PR exercise without any noticeable result thus speaking volumes on the general level of companies’ trustworthiness perceived by the market at this time.

S&P 500 Index Daily Chart

Printing money rally … er What? No, me bad. Quantitative easing rally

LtPinback — Wed, 18 Mar 2009 22:36:37 +0000

The market opened lower but soon resumed the uptrend encountering a bit or resistance at 780.00 then the Federal Open Market Committee (FOMC) announced that the Federal Reserve will buy $300 billion worth of long-term Treasury bonds and thus broke the ticker for the day. Equities jumped, US dollar sunk and Gold and Treasuries went ballistic. Volume was huge and made record level for the 2009.

S&P 500 Index 5min Chart

S&P 500 SPDRs 5min Chart

Rally continues. S&P 500 at the 800 resistance/support and 50 day SMA levels. Next target is a bit muddier but centered at the 850 level then the 920-9450 range.

S&P 500 Index Daily Chart

Federal Reserve Press Release

Release Date: March 18, 2009

Information received since the Federal Open Market Committee met in January indicates that the economy continues to contract. Job losses, declining equity and housing wealth, and tight credit conditions have weighed on consumer sentiment and spending. Weaker sales prospects and difficulties in obtaining credit have led businesses to cut back on inventories and fixed investment. U.S. exports have slumped as a number of major trading partners have also fallen into recession. Although the near-term economic outlook is weak, the Committee anticipates that policy actions to stabilize financial markets and institutions, together with fiscal and monetary stimulus, will contribute to a gradual resumption of sustainable economic growth.

In light of increasing economic slack here and abroad, the Committee expects that inflation will remain subdued. Moreover, the Committee sees some risk that inflation could persist for a time below rates that best foster economic growth and price stability in the longer term.

In these circumstances, the Federal Reserve will employ all available tools to promote economic recovery and to preserve price stability. The Committee will maintain the target range for the federal funds rate at 0 to 1/4 percent and anticipates that economic conditions are likely to warrant exceptionally low levels of the federal funds rate for an extended period. To provide greater support to mortgage lending and housing markets, the Committee decided today to increase the size of the Federal Reserve’s balance sheet further by purchasing up to an additional $750 billion of agency mortgage-backed securities, bringing its total purchases of these securities to up to $1.25 trillion this year, and to increase its purchases of agency debt this year by up to $100 billion to a total of up to $200 billion. Moreover, to help improve conditions in private credit markets, the Committee decided to purchase up to $300 billion of longer-term Treasury securities over the next six months. The Federal Reserve has launched the Term Asset-Backed Securities Loan Facility to facilitate the extension of credit to households and small businesses and anticipates that the range of eligible collateral for this facility is likely to be expanded to include other financial assets. The Committee will continue to carefully monitor the size and composition of the Federal Reserve’s balance sheet in light of evolving financial and economic developments.

Voting for the FOMC monetary policy action were: Ben S. Bernanke, Chairman; William C. Dudley, Vice Chairman; Elizabeth A. Duke; Charles L. Evans; Donald L. Kohn; Jeffrey M. Lacker; Dennis P. Lockhart; Daniel K. Tarullo; Kevin M. Warsh; and Janet L. Yellen.