thechartpatterntrader
New member
8/18 Commentary: The Fed does a 180 degree turn. The Fed held a conference call on Thursday, as New York Fed President Timothy Geithner and Fed vice Chairman Donald Kohn led the march for the Fed to consider an about face. The posted results from the Fed meeting August 7, were unfavorable towards inflation. The central bank stated 'it still is more concerned about the threat of inflation than of recession' and 'a sustained moderation in inflation pressures has yet to be convincingly demonstrated.' They have made several statements in regards to inflation concerns in 2007.
But, 10 days later, the Federal Reserve reversed themselfs with a complete turnabout, in regards to inflation stating that 'while recent reports indicate economic growth continues at a moderate pace, risks to the expansion have risen appreciably.' Which means growth may get sluggish. Additionally, they cut the discount rate by 0.5 percentage point, to 5.75 percent.
After several consecutive positive CPI reports, showing that inflation is remaining in check, I feel some of the comments coming out of the Fed have been reckless and incompetent. Personally, I was concerned about inflation by their ongoing misleading remarks. I have even commented on runaway food & energy prices. But I have revised my stance based on, year over year core personal consumption inflation remains at only 1.9 percent. That is hardly runaway or hyper inflation and the lowest inflation since 2004. I now believe the Fed has finally actually read the CPI report and will lower interest rates in their September meeting if not sooner.
This is an aggressive move, since they have done very little in regards to the credit crisis. While Europe has pumped hundreds of billions into their banking system boosting liquidity, the Fed has only pumped in 94 billion.
If this has only been a 10 + percent correction then we will see evidence that it is over. Watch for the downtrend to break, the 20 day MAs to rise, breaking above resistance, ect...
The Small caps broke above their 20 day MA, and could take a leadership role if this just turns out to be a correction. The S fund has both the midcaps and smallcaps within it. See the S fund chart below.
S Fund
http://stockcharts.com/h-sc/ui?s=$EMW&p=D&yr=0&mn=9&dy=0&id=p27701747733&a=92954125
Russell 2000
http://stockcharts.com/h-sc/ui?s=$RUT&p=D&yr=0&mn=10&dy=0&id=p37094720617&a=83855879
The best of trades,
Chart Pattern Trader
But, 10 days later, the Federal Reserve reversed themselfs with a complete turnabout, in regards to inflation stating that 'while recent reports indicate economic growth continues at a moderate pace, risks to the expansion have risen appreciably.' Which means growth may get sluggish. Additionally, they cut the discount rate by 0.5 percentage point, to 5.75 percent.
After several consecutive positive CPI reports, showing that inflation is remaining in check, I feel some of the comments coming out of the Fed have been reckless and incompetent. Personally, I was concerned about inflation by their ongoing misleading remarks. I have even commented on runaway food & energy prices. But I have revised my stance based on, year over year core personal consumption inflation remains at only 1.9 percent. That is hardly runaway or hyper inflation and the lowest inflation since 2004. I now believe the Fed has finally actually read the CPI report and will lower interest rates in their September meeting if not sooner.
This is an aggressive move, since they have done very little in regards to the credit crisis. While Europe has pumped hundreds of billions into their banking system boosting liquidity, the Fed has only pumped in 94 billion.
If this has only been a 10 + percent correction then we will see evidence that it is over. Watch for the downtrend to break, the 20 day MAs to rise, breaking above resistance, ect...
The Small caps broke above their 20 day MA, and could take a leadership role if this just turns out to be a correction. The S fund has both the midcaps and smallcaps within it. See the S fund chart below.
S Fund
http://stockcharts.com/h-sc/ui?s=$EMW&p=D&yr=0&mn=9&dy=0&id=p27701747733&a=92954125
Russell 2000
http://stockcharts.com/h-sc/ui?s=$RUT&p=D&yr=0&mn=10&dy=0&id=p37094720617&a=83855879
The best of trades,
Chart Pattern Trader
