Market Direction Mid Week Update©

Market Direction: BULLISH alert issued 2/15/2018

The FED raise interest rates today... 

U.S. stock-market indexes ended a turbulent session slightly lower on Wednesday after the Federal Reserve delivered its sixth interest-rate increase since the end of 2015 and signaled it still expects to deliver two more before the end of the year.

The central bank also upped its forecast for the number of rate increases it expects to deliver in 2019. Stocks saw whipsaw price action, swinging between gains and losses following the policy announcement and during Powell’s news conference before ending the session in negative territory.

Read: Powell press conference: live blog recap

What are markets doing?

The S&P 500 SPX, -0.18% fell 5.01 points, or 0.2%, to 2,711, with eight of its 11 main sectors posting declines. Energy shares led the gains, rising 2.6%, as oil futures hit a seven-week high. Consumer-staples shares were the worst performers, down 1.3%.

The Dow Jones Industrial Average DJIA, -0.18% which at its session high was up more than 250 points, ended down 44.96 points, or 0.2%, at 24,682.31. The Nasdaq Composite Index COMP, -0.26% declined 19.02 points, or 0.3%, to 7,345.29.

Small-cap stocks bucked the trend, ending higher. The Russell 2000 index RUT, +0.57% rose 8.9 points, or 0.6%, to 1,579.30.

Much of the gain for the Russell was due to a rally by banking stocks, which comprise 25% of the benchmark, according to FactSet.

What is driving the markets?

The central bank raised interest by a quarter of a percentage point, as widely expected. However, Powell played down policy makers’ view on future rates as seen on the so-called dot plots, which are anonymous forecasts from each FOMC member on the future path of the fed-funds rate.

“The only thing that got a vote at the meeting was this rate hike. No one voted on the dot plot,” he said.

The yield on 10-year U.S. Treasury note TMUBMUSD10Y, -0.22%  initially extended its rise, topping 2.93%, before paring the increase to trade near 2.883%—not far off its level ahead of the policy announcement. Yields and Treasury prices move in opposite directions.

The ICE U.S. Dollar Index DXY, -0.20%  weakened after the Fed decision, trading 0.8% lower at 89.710.

What are strategists saying?

“The Fed is forecasting two more hikes this year, but beyond that nobody knows what the economy will do, so their projections are meaningless,” said Joe Saluzzi, co-head of equity trading at Themis Trading.

Saluzzi also said extremely low volumes may have contributed to the choppy price action, possibly due to the spring snowstorm hitting the East Coast.

“It’s very quiet, especially for a Fed and when volumes and liquidity are thin any sizable order can move markets as we are seeing today,” Saluzzi said.

“Markets should like this statement that seems to have just enough for everyone: it’s gradual enough for the bulls, but signals a more aggressive approach down the road in 2019-2020,” said Ryan Larson, head of equity trading at RBC Global Asset Management.

“A good percentage of Russell 2000 stocks are financials, which respond well to an environment with a steepening yield curve. As primarily domestic stocks, they respond well to strong domestic conditions,” said Mark Luschini, chief investment strategist at Janney Montgomery Scott.

What data are in focus?

The current-account deficit for the fourth quarter rose by 26% in the fourth quarter, widening to $128.2 billion from a revised $101.5 billion in the third quarter.

Existing-home sales ran at a seasonally adjusted annual pace of 5.54 million in February.

See: MarketWatch’s economic calendar

What are other markets doing? 

Asian stocks closed mixed, with Japan’s exchange NIK, +0.36%  closed for a holiday. In Europe, most indexes closed in negative territory.

Oil prices CLK8, +0.32% climbed to trade at their highest levels in nearly seven weeks, after a surprise weekly decline in U.S. crude inventories. May West Texas Intermediate crude jumped 2.6% to settle at $65.17 a barrel.

Gold prices GCJ8, +0.90%  settled higher and rose in electronic trading. Gold finished at $1,321.50 an ounce, up $9.60, or 0.7%.

$tockMarketDirection proprietary model is currently BULLISH. We strongly encourage you to monitor positions closely, exercise proper money management strategies and follow us at  $tockMarketDirection for ALERTS we may issue advising a change in the current market direction. Stay tuned and follow us. If you have a testimonial or comment of how this website has helped you we would like to know, email us. Share with a friend.

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

Stock Market Direction Recommendation (2/15/2018)
Dow	up 599.98 points a 2.38% gain	2/27/18
Nasdaq	up 181.66 points a 2.50% gain	3/13/18
S&P 500	up 70.70 points a 2.59% gain	3/13/18

Related Link: http://www.stockmarket-direction.com/