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16Mar2016 Market Update: Fed's Rate Decision To Hold Rates And Sees Only Two Hikes This Year, US Dollar Falls, Gold Rises Sharply And Investors Are Still Concerned On Market Direction

Written by Gary

This report is late posting because of the Fed's monetary rate decision report at 2 pm.

Briefly, the US market (SP500) shot up and beyond R2 (2023) from S1 (2009) after the minutes were published. $VIX fell to 15, WTI crude remained steady at $38, the US dollar fell sharply to the low 96's and gold rose from 1229 to 1246. As usual the markets after a brief exaggerated run-up are sliding back down to where they were BEFORE the report.


Here is the current market situation from CNN Money

North and South American markets are broadly higher today with shares in U.S. leading the region. The S&P 500 is up 2.26% while Brazil's Bovespa is up 0.46% and Mexico's IPC is up 0.35%.

What Is Moving the Markets

Here are the headlines moving the markets.

Fed holds rates steady as U.S. economy grows despite global risks

WASHINGTON, March 16 (Reuters) - The Federal Reserve held interest rates steady on Wednesday, but indicated that moderate U.S. economic growth and "strong job gains" would allow it to resume tightening monetary policy this year.

EU regulators want more info on Apple's Irish tax deal

BRUSSELS/DUBLIN - European Union antitrust regulators have asked Ireland to provide further details on the country's tax deal with Apple before deciding whether this constitutes illegal state aid to the iPhone maker.

U.S. data points to firming economy, inflation

WASHINGTON (Reuters) - Underlying U.S. inflation increased more than expected in February as rents and medical costs maintained their upward trend, which could keep the Federal Reserve on course to gradually raise interest rates this year.

Wall St. pauses ahead of Fed statement

(Reuters) - Wall Street held its collective breath on Wednesday afternoon, awaiting the outcome of the U.S. Federal Reserve's meeting on monetary policy.

Pimco's Callin, head of equity product management, retiring in second quarter

NEW YORK (Reuters) - Sabrina Callin, managing director and head of equity product management at Pacific Investment Management Co, has decided to retire from the firm in the second quarter, Pimco said on Wednesday.

SEC chief says may have to 'rein in' some non-GAAP disclosures

WASHINGTON (Reuters) - The head of the Securities and Exchange Commission on Wednesday said her agency is examining whether companies could mislead investors through some of current accounting rules.

Oil up 4 percent as OPEC firms up meet, U.S. gasoline demand soars

NEW YORK (Reuters) - Oil prices rose about 4 percent on Wednesday, resuming their rally from a two-day slide, after major oil producers firmed up plans to meet in Qatar to discuss an output freeze and as U.S. crude stockpiles grew less than expected and gasoline demand soared.

Major automakers to announce pact to install auto-braking systems by 2022

WASHINGTON (Reuters) - Major automakers will announce Thursday they have agreed to install automatic emergency braking systems in nearly all U.S. vehicles by September 2022, three sources briefed on the plans said.

Central banks' 'forward guidance' proving a tricky policy tool

FRANKFURT (Reuters) - Words don't always come easy for the world's central bankers, as Mario Draghi was reminded last week.

Trading The FOMC

With the market already pricing in dramatically fewer rate-hikes that the "cheerleading" Fed, Deutsche Bank expects the USD to respond favorably to the FOMC's signals on Wednesday, contrary to the pattern seen after the last four FOMC meetings with press conferences.

The waning influence of the Fed's projections is showing up in derivatives markets. After the December revision to the projected path of interest rates, traders responded much less than they did earlier in the year in the market for derivatives known as overnight-indexed swaps.

But, as Deutsche's Alan Ruskin notes, the likely comment on the balance of risks will be one indication that all upcoming FOMC meetings are "live." Among the conundrums facing the Fed, are how much weight to place in the predictive powers of the past (USD led) tightening in financial conditions; and the signal from a flatter yield curve...

Table 1 shows how FX and bond markets have typically registered much larger (absolute) one day price changes on days when FOMC's end with a press conference than when they don't. These FOMC press conference daily moves also vastly exceed the sustained reaction on payroll days. The reasons are not hard to find - FOMC days with press conferences, have the Fed Chair Q&A, as well as the economic projections and the notorious dot plot to respond to.

BAML Warns Bad Market Breadth Signals November Nosedive Deja-Vu

Market breadth momentum contonues to weaken as the S&P 500 grinds higher, setting up a bearish outcome similar to the early November 2015 top. As BofAML's Stephen Suttmeier warns a break below channel support at 1989 would signal an interim top.

The NYSE McClellan Oscillator is a breadth indicator that shows a negative divergence with price action. This indicator showed a bearish divergence with the S&P 500 from early October to early November that preceded the early November break below the rising channel from early October. This ended the rally off the late September low and was confirmed by a loss of the late August uptrend line in the McClellan Oscillator.

The pattern in mid-March is eerily similar to early November, as the McClellan Oscillator shows a bearish divergence with the S&P 500 grinding higher within the rising channel from February. A break below channel support at 1989 (rises ~6.54 points/session) and the late January uptrend line on the McClellan Oscillator could be the signal for an interim top in the S&P 500. Channel resistance is 2061.

Source: BofAML

First There Was "Brown's Bottom," Now Gold Gains On "Morneau's Miscue"

Via RebootingCapitalism.com,

"Sooner or later, everybody sits down to a banquet of consequences"
- Robert Louis Stevenson

Screen Shot 2016-03-15 at 2.49.18 PM

Gordon Brown, back when he was the UK Chancellor of the Exchequer, distinguished himself by selling off approximately one-half of Great Britain's gold reserves at what turned out to be a near-bottom at the end of the secular bear market in gold which lasted from 1980 to 2000-ish. He will probably be remembered for this more than anything else he ever did, even as Prime Minister. He'll be somewhat of a laughing stock because of it (gold now, even after a vicious near 5-year cyclical bear, worth a paltry 300% to 400% more than what England garnered from it's sales). That chapter among those who pay attention to this sort of thing is affably called "The Brown Bottom".

Two events recently converged in the news to create an analogous moment here in Canada:

1) the news that the new Finance Minister Bill Morneau has completed selling all remaining Government of Canada gold reserves. Canada, the 5th largest gold producer in the world, ...

Stocks Gain as Fed Stands Pat

U.S. stocks jumped immediately after the Federal Reserve kept interest rates on hold and cut its expectations for rate hikes this year to two rather than four.

Treasury Yields Hit Highs

The yield on the two-year U.S. government note on Wednesday brushed over 1% for the first time since early January while the yield on the benchmark 10-year note nearly hit 2% again.

Oil Prices Rise on Producers' Output Meeting Plan

Oil prices wavered after new government data Wednesday showed some disappointing signs on demand, but the market is still holding to gains tied to a meeting among exporters who may cap their output.

Text of FOMC decision

Federal Reserve leaves interest rates unchanged.

The Fed: Fed holds rates and sees only two hikes this year

The Federal Reserve on Wednesday said it now sees only two rate hikes this year given the risky economic environment.

Market Extra: These bonds have a huge stake in Trump, Clinton race to the White House

Here are some key election-related factors to keep an eye on in light of the shifting political and regulatory climate muni bonds face.

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To contact me with questions, comments or constructive criticism is always encouraged and appreciated:

gary@econintersect.com

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