FOMC Thoughts and other Musings

From the FOMC…First Impression

A whole lot of nothing.

Continued Support for the markets

…at the expense of the dollar.

= Continued rise in Commodity markets and gold in particular as the dollar continues declining.

Upon further review
One factor that could start to play in is the fact that there hasn’t been any commitment to expanding the purchase programs, only to extend the MBS purchases into next year. The QE will complete by October.

This lack of commitment to printing more dollars and thus increasing commodity and equity prices could be bullish for the dollar. A higher dollar would translate to lower commodities and stock prices.

On a side note
If there’s an external shock, such as an economic indicator pointing to weaker times ahead, then we would probably have a pretty large correction (I believe the chances are high in the coming months).
Leading indicators yesterday were interesting. One of the negative factors was Durable Goods Orders. We are about to see the individual report on Friday. Could the durable goods orders portion of the report be foreshadowing a similar negative result on Friday?
Copper prices refuse to rise, inventories refuse to fall….same with oil prices.

China (Shanghai) is not rebounding since the drubbing it took a few weeks ago.

These signs go against the V-Shaped recovery thesis. Will they change?
When will the rest of the market starting honing in on this? China’s already seems to have.
Look out for weaker than expected US Q4 number as two important stimuli expire (cash for clunkers and home-buyers’ credit)
For the Bulls
VIX has broken through long standing support of 23. You can either take it as further confirmation of increasing risk appetite, or significant complacency/Bear capitulation and therefore a contrarian indicator. This one indicator doesn’t provide the full basis of my stance which would be as a contrarian indicator. Numerous other indicators (mentioned above) do not support an organic growing economy. While we have gotten a strong jolt from stimulus measures and monetary policy administered so far, there is a danger of weakness once those measures run out (See Edmunds report on car sales for September).
And finally I conclude: After the FOMC announcement, equities rocked higher based on (see the top portion of my post). But pretty much trended downwards into the close, despite a continued trashing of the dollar (though it did hold at the end to stay near the important 76.00 support). On immediate reaction, I would see this as a negative, but we’ll see if we open weak tomorrow. Look at the dollar, if it breaks strongly under the 76 support, then it will probably translate to higher commodity and stock prices.

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