Friday, September 9, 2016

Focus Shifting Towards #TheFed As Expected

As discussed previously, investors' focus is slowly shifting to what the Fed will do in September.  The Fed is desperate to raise rates under a backdrop of economic strength. Insight readers already know they waited too long.  The guise of economic strength has disappeared without much headline fanfare; the majority simply doesn't recognize the economic contraction yet.

If the Fed raise rates as the economy weakens, their credibility in reading not only the domestic but also global economy will be questioned.  Volatility across all markets will increase as the public questions the Fed's abilities and understanding.  The majority, a panicky group that believes stocks follow the economy and economy follows the Fed, is selling on the growing prospect of a Fed rate hike in September.  This short-term trend will only encourage the bears, a group screaming about the potential for a major crash in US stocks for months, to growl even louder.

The computer, however, ignores them all.  It recognizes that sentiment towards stock is closer to a pessimistic than optimistic extreme.  This bullish setup suggests any decline from here is more likely a false decline (false break down) that will defy bearish expectations.

Headline: Increasingly risky to delay U.S. rate hike, Fed's Rosengren says

QUINCY, Mass. (Reuters) - The Federal Reserve, long hesitant to raise U.S. interest rates, increasingly faces risks if it waits too much longer so a gradual policy tightening is likely appropriate, a top Fed official said on Friday.

In another sign that a U.S. rate hike is approaching, Boston Fed President Eric Rosengren said "risks to the forecast are becoming increasingly two-sided." That means that while a slowdown overseas remains a concern, the U.S. economy has proven resilient and could even overheat if Fed policy remains unchanged for too much longer, he said.



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