Stocks were very quiet heading into the Fed policy announcement at noon ET, but things got a little more noisy after that. It was a volatile afternoon and by the close the Dow had lost 114-points. Most stock indices and bonds were down on the day as the dollar spiked.
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A 100-point move in the Dow isn't what it used to be percentage-wise, but it still gets our attention. In early 2009, a 114-point loss for the Dow was about a 1.6% loss. Yesterday's 114-point decline was just a 0.7% loss, but it seemed worse, and it actually was worse earlier when the Dow was down over 200-points at one point before rebounding toward the close. I think the late buying was a result of reality sinking in that there wasn't much said, but perhaps there is a little more uncertainty from the Fed, and the market doesn't like that.
The SPY (S&P 500 / C-Fund) posted an interesting bar yesterday. It was just barely an outside day (higher high and lower low compared to Tuesday) and it closed down, which is a short-term bearish sign, but it also closed well off the lows so it could also be looked at as a positive reversal day. I'll call it a wash but give the tie-breaker to the bulls because it was able to hold above the rising support line, and close above the 20-day EMA.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
The Russell 2000 lost 0.7% and it actually produced an inside day where the high was slightly lower than Tuesday's high, and the low was slightly higher than Tuesday's low. It produced a good sized kangaroo tail and remained above some key support levels.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
I thought it was interesting that the financial sector had a good day; basically closing flat. The sharp rise in bond yields and whatever Janet Yellen said had investors moving their money into the bank and other financial stocks.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
One of the reasons we saw losses in stocks and bonds, as well as gold and other commodities, was because of the dollar's reaction to the Fed. The UUP finally broke above its falling wedge, and with authority, and it was able to fill the open gap near 21.45 that had been open for a couple of weeks.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
Bonds dropped and yields rallied sharply yesterday after the Fed decision, particularly on the 10-year Treasury. The IEF (below right) is back down testing the lower end of its recent trading channel. We've been waiting for a break out of these ranges to know what to do next with bonds and the F-fund.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
Take a look at the move in the yield on the 10-year. We have been watching the 2.6% level since it was testing the 200-day EMA a few days ago and we've seen quite a bounce since then. But now we may have a big bear flag here which, if it eventually breaks down as bear flags do, would be bullish for the bond market and the F-fund. It's fully developed but it may take a few days or more to get resolved.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
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Tom Crowley
Posted daily at TSP Talk Market Commentary
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