Market Direction Mid Week Update

Market Direction: BULLISH alert issued 6/2/2016

Federal Reserve officials at their July meeting were relieved that their concerns over Brexit and the job market eased but were divided over whether that meant they should quickly hike interest rates again, according to the minutes of the policy meeting released Wednesday.

Two Fed officials pushed for a rate hike at the meeting, but more officials judged it was a good idea to wait for additional information, the minutes said.

Fed officials voted 9 to 1 to hold rates steady at the meeting.

Fed officials in recent days have stressed that a rate hike could come at any of the three remaining meetings this year — in September, November or December.

New York Fed President William Dudley on Tuesday said a rate hike in September was possible.

The minutes do not elaborate on the timing of any move. Fed officials said they would be “open” and “flexible” about when to take another step.

“The Fed is inching closer to a rate hike, but it likely isn’t there yet,” said Sal Guatieri, senior economist at BMO Capital Markets.

“It will likely take further evidence that the economy is picking up, including another strong jobs report in August, to spur a move as early as September,” he added.

While the near-term downside risks were lower, Fed officials still seemed worried about developments abroad, in particular the economic outlook for China and the poor health of European banks.

Doves who want the Fed to go slow said they wanted to have confidence that the economy could handle another rate hike.

Hawks said the low unemployment rate justified a rate hike in the near future. They also cited the potential for asset bubbles to develop from keeping rates so low.

“The Fed seems as confused as ever over what to do,” said Robert Brusca, chief economist at FAO Economics.

But the argument that the Fed should at least raise rates once this year is likely to hold sway, he said.

“I can see enough Fed members getting behind a long delayed rate hike to support at least one this year,” he said.

Last December, the Fed had penciled in four rate hikes this year.

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The all-time highs since our initial recommendation to go LONG this market. Here is how the markets have performed:

Stock Market Direction Recommendation (6/2/2016)
Dow	up 884.05 points a 4.95% gain	8/15/16
Nasdaq	up 300.00 points a 6.03% gain	8/15/16
S&P 500	up 88.55 points a 4.21% gain	8/15/16

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