2016/10/18 Quick Update: Feeble Figures… again
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Quick Update: Tuesday, October 18, 2016
Feeble Figures… again
This is the follow-up to last Thursday evening’s Commentary: Fear of Fed…with a twist post. It is very brief due to not much having changed in either that perspective or the overall Evolutionary Trend View. That also includes the Friday evening update of the Market Observations in the lower section of that post. As noted in the psychological background in the first section last of last Thursday evening’s post, there is a very interesting twist regarding the next in the series of ‘done deal’ rate hikes that have not happened so far in 2016, where the Fed predicted four last December. That ‘twist’ is the changes to the FOMC voting members in 2017, effective at the first meeting.
The question becomes the incentives to raise rates at the last meeting of the current much more hawkish FOMC, or decide that conditions are still inhospitable for anything that might weaken an already less than strong US economic growth.
As in all of the previous circumstances in that regard since the first rate hike in almost a decade last December, the Fed seemingly remains ‘data dependent’. That is one of the key reasons it was destructive folly to put forth such aggressive US growth and interest rate projections along with last December’s rate hike (see our December 16th post.) This was a clear example of enlisting an aggressively bullish future view to justify what they did.
Much the same seems to have occurred since the Jackson Hole ‘Hawk-fest’ in the wake of a string of temporarily stronger US economic releases. As also noted last Thursday, how this will play out makes all of the near term economic data even more important. Will the outgoing voting members be interested in a smooth transition into what will clearly be a more dovish FOMC if the data weakens? OR… do they defy the data and adopt a Nike strategy of “Just do it”?
It has been typical after previous intensification of the hawkish view at the FOMC for the data to weaken, as it did late last week into this week. Yet in spite of very much weaker than expected Empire Manufacturing and slightly light US Industrial Production Monday and US CPI today, the equities have not weakened down to the lower, more attractive support levels. Instead of that the late September 2015 psychology where weak data turned into a ‘bad news is good news’ (no FOMC hike) psychology has already arrived.
The more important Fed influence returns with Wednesday afternoon’s Fed Beige Book release, followed by more extensive economic data on Thursday prior to a quiet Friday. The dilemma is that the US equities have already rallied back up near the key higher resistance, and whether they can sustain activity above it will likely determine the next near-term swing.
That’s it for now on this Quick Update. Please refer to the last Thursday evening’s Commentary: Fear of Fed…with a twist post for a more extensive review of the psychology, and the Friday evening Market Observations update in the lower section of that post for the still relevant Evolutionary Trend View for price movement perspective.
Thanks for your interest.
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