The Fed Wind Always Blows

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FOMC day again today and as ever I’m astounded by the number of people hanging onto Yellen’s every word, and what a market moving event this tends to be. Even more amazing is the importance that everyone seems to attach to the Fed’s ‘control’ of interest rates, and in the event that they show a small sliver of backbone today and take the tiny step of increasing the fed rate from almost nothing to a little more than almost nothing, then this will be extensively debated over coming weeks as though it really matters.

The truth is though that the fed rate only really impacts very short term interest rates, and that anything longer term is determined by markets in the form of the yields on the ten year (TNX) and 30 year (TYX) treasuries. The Fed has little influence over these as far as I can tell, and doesn’t appear to employ any technical analysts good enough to allow the Fed bigwigs to comment intelligently about them. On a good day their forecasts for these are fairly random, and on a bad day (late 2013) almost perfectly inaccurate. Anyone genuinely interested in bond yield direction should be watching Chart Chat at twice a week, or at minimum coming to our December forecast for the next year, which this year (for indexes, bonds and currencies) is after the close tomorrow and free to all. You can register for that on this page here if you’re interested.

In the event that a Fed analyst makes it to that webinar tomorrow, and then puts in a lot of follow up work on the high level TA we use, it’s possible that in time he/she might improve enough as a bonds analyst to aspire to make coffee for the much better bonds analyst who is worthy to aspire to shine shoes for Stan and myself, but I doubt it. Apart from any other considerations I suspect that anyone at the Fed who shows signs of developing real world forecasting skills finds themselves having to find employment somewhere else before too long, to preserve the consensus they seem to value so highly there. Sheep are always happiest in a flock of course. 🙂

Some of you noticed the almost perfect test yesterday of the ideal December high target for SPX that I gave earlier this week. The reversal there strengthens that as a resistance area and it’s now possible that SPX/ES and RUT/TF are topping out under their respective resistance trendlines. Unless we see those break up with confidence further upside on both is now very limited. I won’t post those today as I looked at those in my premarket video at this morning, and it would be better to watch that. You can see that here. I also look at DX, CL, NG, GC, ZB & GC in the video.

A test of rising support on ES is badly overdue. That’s now in the 2256 area and would be an obvious target this morning, before we start getting wild FOMC spikes this afternoon. All three charts are the ones I used in the premarket video today. ES Mar 60min chart:

161214 AM ES Mar 60min

Not much change on NQ since I capped this chart three hours before the open. NQ Mar 60min chart:

161214 AM NQ Mar 60min

TF is starting what should be a bullish underthrow of falling wedge / bull flag support, as long as key support at the weekly pivot at 1361.8 can’t be broken and converted to resistance. the next obvious move would be a retest of the all time high on TF, and likely failure there. TF Mar 60min chart:

161214 AM TF Mar 60min

We don’t think the December highs are in on SPX/ES and RUT/TF yet, but unless we are going to see some strong trendlines break to open the upside, any higher highs this month are likely to be marginal.

Stan and I are doing webinars with forecasts on a wide variety of instruments (including bonds) for 2017 at after the closes on Thursday and Friday. These are public and free to all and if you’d like to attend you can sign up for those on this page here.