Fed Adheres To Leaked Expectations
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September 17, 2014

9-17-2014 4-56-52 PM Yellen

The report from Fed anointed reporter, the WSJ’s Jon Hilsenrath Tuesday was correct the statement interest rates would remain low for a “considerable time”. Tuesday after the market’s closing Hilsenrath modestly retracted his statement to suggest his comments were based on a sense that this report would include that comment.

There’s an old maxim in markets when dealing with Fed releases which includes “the first move’s the wrong move”.

That held true Wednesday as after the statement markets dropped only to rally sharply later. As we tweeted early today, Tuesday (with the Hilsenrath leak) became Wednesday. In a rather defensive move stocks sold-off rather sharply into the close with a gain. Overseas markets were much weaker.

Other news on the day included better earnings from FedEx which beat estimates by 14 cents. Neglected in most reports was the fact the company repurchased 5.3 million shares which accounted for 15 cents of positive earnings. This continues the financial engineering companies are engaging in. Of course FedEx and other companies are merely taking what the Fed is giving them—the ability to borrow cheaply and use the proceeds to buy back shares. This means the company doesn’t invest in long-term growth but just growth in the stock price over the short-term.

Now we move on to the referendum in Scotland where recent polls reflect a no vote as more likely. This could lead to some unrest since yes voters are more passionate and energized.

While most were focused on the Fed, U.S. economic data included a sharp increase for homebuilders as the Housing Market Index jumped to 59 vs 56 expected & prior 55.

The dollar was quite strong which knocked commodity prices lower once again. But if the Fed wants more inflation (as they, not you may calculate it) these lower commodity prices will only lower inflation. Just don’t ask J-Yell why meat prices and overall food prices are soaring.

Leading market sectors higher included: Homebuilders (ITB), REITs (ICF), Financials (XLF), Banks (KBE), Transports (IYT), Small Caps (IWM), Biotech (IBB), Semiconductors (SMH), Dollar (UUP), Materials (XLB) Solar (TAN) and Industrials (XLI),

Leading market sectors lower included: Gold Miners (GDX), Energy (XLE), Japan (EWJ), China (FXI), Hong Kong (EWH), Australia (EWA), Brazil (EWZ), Mexico (EWW), Emerging Markets (EEM), EAFE (EFA), Turkey (TUR), Germany (EWG), UK (EWU), Russia (RSX), Gold (GLD), Crude Oil (USO), Silver (SLV), Base Metals (DBB) and Commodity Tracking ETF (DBC).

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The top 20 market movers by percentage change in volume whether rising or falling is available daily.

Volume as usual on a Fed day was higher and breadth per the WSJ was modestly positive.

Charts of the Day
  • SPY 5 MINUTE

    SPY 5 MINUTE

  • SPX WEEKLY

    SPX WEEKLY

  • INDU DAILY

    INDU DAILY

  • RUT WEEKLY

    RUT WEEKLY

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    NDX WEEKLY

  • QQEW WEEKLY

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  • SMH WEEKLY

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  • ITB WEEKLY

    ITB WEEKLY

  • IBB WEEKLY

    IBB WEEKLY

  • ICF WEEKLY

    ICF WEEKLY

  • XLB WEEKLY

    XLB WEEKLY

  • XLI WEEKLY

    XLI WEEKLY

  • XLF WEEKLY

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  • IYT WEEKLY

    IYT WEEKLY

  • HYG WEEKLY

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  • TLT WEEKLY

    TLT WEEKLY

  • UUP WEEKLY

    UUP WEEKLY

  • FXE WEEKLY

    FXE WEEKLY

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    FXB WEEKLY

  • GLD WEEKLY

    GLD WEEKLY

  • GDX WEEKLY

    GDX WEEKLY

  • SLV WEEKLY

    SLV WEEKLY

  • DBB WEEKLY

    DBB WEEKLY

  • USO WEEKLY

    USO WEEKLY

  • DBC WEEKLY

    DBC WEEKLY

  • EFA WEEKLY

    EFA WEEKLY

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    EEM WEEKLY

  • VGK WEEKLY

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    EWZ WEEKLY

  • EPI WEEKLY

    EPI WEEKLY

  • FXI WEEKLY

    FXI WEEKLY

  • NYMO DAILY

    NYMO DAILY

    The NYMO is a market breadth indicator that is based on the difference between the number of advancing and declining issues on the NYSE. When readings are +60/-60 markets are extended short-term.

  • NYSI DAILY

    NYSI DAILY

    The McClellan Summation Index is a long-term version of the McClellan Oscillator. It is a market breadth indicator, and interpretation is similar to that of the McClellan Oscillator, except that it is more suited to major trends. I believe readings of +1000/-1000 reveal markets as much extended

  • VIX WEEKLY

    VIX WEEKLY

     


    The VIX is a widely used measure of market risk and is often referred to as the "investor fear gauge". Our own interpretation is highlighted in the chart above. The VIX measures the level of put option activity over a 30-day period. Greater buying of put options (protection) causes the index to rise.

 

 

Closing Summary

The financial media doesn’t shine a light on the effects of corporate buybacks financed courtesy of the Fed’s ZIRP policies which allow companies to borrow on the cheap to do this. Of course this benefits holders of all sort but doesn’t grow the core business of the country in the long term. But clearly stock float (supply) is being reduced. Yellen is never asked about this naturally since correspondents only toss softball questions to her.

Now investors turn to Scottish referendum, Alibaba IPO, Jobless Claims and Quadwitching.

Let’s see what happens.

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...

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Dave Fry is founder and publisher of ETF Digest and has been covering U.S. and global ETFs since 2001.

He is the author of "Create Your own ETF Hedge Fund: A Do-It-Yourself Strategy for Private Wealth Management" published by Wiley Finance and "The Best ETFs: U.S. Equities, A Companion Guide to Building Your ETF Portfolio".



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Disclaimer: The charts and comments are only the author's view of market activity and aren't recommendations to buy or sell only any security. Market sectors and related ETF's are selected based on his opinion as to their importance in providing the viewer a comprehensive summary of market conditions for the featured period. Chart annotation's aren't predictive of any future market action rather they only demonstrate the author's opinion as to a range of possibilities going forward. More detailed information, including actionable alerts, are available to subscribers at www.etfdigest.com

 

ETF Digest

Market Summary
NYSE Composite Index S&P 500 Index Nasdaq Composite Index Russell 2000 Small Cap Index NYSE Composite Index S&P 500 Index Nasdaq Composite Index Russell 2000 Small Cap Index 10 Year Treasury Note Yield Gold Bugs Index Morgan Stanley High Tech 35 Index Market Chart
Commodity Quote Change Change % NY
Gold1,225.801.600.13 % 09/18
WTI Crude Futr93.02-1.40-1.48 %17:15
Index Quotes Change Change % Local
CRB280.94-3.16-1.11 %17:27
US Dollar84.38-0.02-0.03 %17:00
Index Quotes Change Change % Local
VIX12.03-0.62-4.90 %16:14
MSCI Value Daily MTD YTD
Brazil2423.602-2.23 %-9.98 %9.26 %
Russia645.030-0.32 %-0.59 %-18.03 %
India514.4161.65 %1.21 % 26.30 %
China64.905-0.88 %-1.85 %2.86 %