Fed Announcement Dampens Stock Rally Efforts, T-Bonds March On
equity markets closed lower but held onto the low posted earlier in the day
after the Federal Reserve said the economy was â€śproceedingâ€ť rather than
strengthening like it had said in its last report in April.This change in language helped pressure the
stock market but failed to trigger an all out selling frenzy.
Stocks were under pressure since early in the session after
a worse than expected home sales report triggered a sell-off. The weakness was
fueled by the thought that the weak housing market would derail the U.S. economic
recovery. The report showed that perspective buyers left the market after tax
incentives were dropped. The number reached its lowest level in 50 years.
The September E-mini S&P traded lower early in the
trading session, testing a key 50% level at 1083.25. This move so far amounts
to a retracement rather than a change in trend. A failure to hold this level
could trigger an even further decline to 1072.50.
The September E-mini NASDAQ stopped short of testing its 50%
retracement level at 1854.75. A move through this price could trigger a further
break to 1834.50.
Losses were limited in the September E-mini Dow, preventing
the market from completing its 50% retracement at 10073.
The short-term main trend is still up in the equity markets.
So far all weâ€™ve seen is a two-day break into a retracement zone which
indicates the move can only be characterized as a normal correction. Looking at
the bigger picture however, yields a different assessment. From the April top
down to the June low, the markets look bearish, after completing normal 50%
retracements of the huge Spring break.
September Treasury Bonds rallied on the Fedâ€™s assessment of
the weak economy. The inability to break the T-Bonds after the stock rally is
further proof that investors are still suspect about future corporate profits
and the U.S.
economyâ€™s ability to maintain its growth pace.
The September Euro finished higher after reversing earlier
weakness following a weak assessment of the U.S. economy by the Federal Open
Federal Reserve officials downgraded their outlook for the
economy, saying that the recovery was â€śproceedingâ€ť, not strengthening as they
had said in their previous FOMC policy statement in April. The change in the
statement indicates that there was less then favorable data reported since the
committee last met.
In addition to the change in the view of the economy, the
Fed left the target federal funds rate at the current range of zero to 0.25%
and reiterated that interest rates will remain low for an extended period.
Policymakers put some blame on the slowdown in the economy on the European debt
The late session break in the Dollar against the Euro
reversed earlier bullishness. At the mid-session, the Greenback was trading
mixed against most currencies. Trading was light, but the Dollar did get a
boost following a plunge in the U.S.
housing market. Gains probably would have been greater if volume was at average
Early during the session the Euro broke after a report
showing a drop in new U.S.
home sales weighed heavily on higher risk assets. Traders looked for safety in
the Dollar as the report indicated a still weak U.S. economy and the possibility of
a double-dip recession in the housing market.
At the mid-session, the Euro was nearing a key retracement
zone at 1.2174 to 1.2102 but never quite reached this level. The turnaround in
the Euro suggests that a secondary higher bottom may be forming which indicates
buyers may be trying to wrestle the trend away from the sellers.
Although a break into the retracement zone is still
possible, upside momentum indicates that the market may make a run at the last
swing top at 1.2467. This breakout move will set up a further rally into a
major downtrending Gann angle formation at 1.2609.
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Tue 19 June 2018 A 12:30 US- House Permits/Starts Wed 20 June 2018 A 14:00 US- Existing Homes Sales A 14:30 US- EIA Crude Thu 21 June 2018 AA 11:00 GB- Bank of England Decision A 12:30 US- Weekly Jobless Fri 22 June 2018 AFlash PMIs
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