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The End is Near! Might Fed Announcement Move Traders to Trade Again?

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September 21, 2016

(Wednesday Market Open) One down; one to go. That’s on central bank verdicts, and the Bank of Japan’s decision to keep interest rates steady at 0.1% but tweak its policy framework appears to have been greeted well, if the early market moves are any indication. Next up: The Federal Reserve at 2 p.m. ET.

Then the waiting, waiting, waiting ends and maybe traders will be able to start, well, trading again. The S&P 500 (SPX) has been hanging at that 2,139-2,140 level for nearly three straight days now. Might it break out today?

It depends. The CME Group's odds strongly favor the Fed standing pat on leaving the federal funds rate—the rate banks charge each other for very short-term loans—at 0.5%. But what will the Fed say about expanding interest rates in the future and how will it define “future”? Is future December? How about February? What about sometime in 2017?

As has been evident in recent months, the markets have reacted according to sentiment, which has been based on what Fed members are saying when. If one said he supports a rate hike, the markets have gone south. If another said the time is not right, the markets have gone north. As the clock has ticked ahead of today’s announcement, the markets have moved east and west, but by very small steps. In the early going today, they have moved higher in bigger strides. Might that be a jumping point for a bigger leap if the Fed does what the market is anticipating?

But be clear about this: It is what Chair Janet Yellen says that will be closely parsed. Tough talk may be hard to swallow, but every word will be dissected for some hint on what the Fed might do in the future. But, really, might it all be for naught? Last December, the Fed suggested that it was considering increasing interest rates at least four times this year. But what happened? The data-dependent Fed thought the data throughout the last 10 months didn’t support an interest-rate hike.  

In the early going, the Dow Jones Industrials (DJIA), the SPX and the Nasdaq Composite (COMP6) were all on an incline and there’s no other piece of news expected that many analysts say will dramatically move them until The Decision.

West Texas Intermediate (CLX6) futures were crawling toward $45 a barrel apparently on talk, once again, that major oil producers would finally agree to cap oil output as well as news that oil reserves fell. The latest data from the American Petroleum Institute recorded a 7.5-million a barrel drop in crude supplies late yesterday, ahead of this afternoon’s closely watched Energy Information Administration report on U.S. supplies. In the early going, CLX6 was hovering in the $44.90-plus range.

S&P 500

FIGURE 1: AND THE FLAT LINE GETS LONGER.

The S&P 500 (SPX), plotted through Tuesday’s close on the TD Ameritrade thinkorswim® platform, straddled the flat line again as investors sit on the sidelines ahead of today’s Federal Reserve decision on what to do with interests rates. Data source: Standard & Poor’s. For illustrative purposes only. Past performance does not guarantee future results.

Maybe Yellen Sees “Invisible” People. That’s what Gallup Chief Executive Jim Clifton calls the 25 million people in the U.S. whose “economic lives have crashed,” in a recent blog. “These 25 million people are invisible in the widely reported 4.9% official U.S. unemployment rate,” he wrote.

“Let's say someone has a good middle-class job that pays $65,000 a year. That job goes away in a changing, disrupted world, and his new full-time job pays $14 per hour—or about $28,000 per year. That devastated American remains counted as ‘full-time employed’ because he still has full-time work—although with drastically reduced pay and benefits. He has fallen out of the middle class and is invisible in current reporting.”

He further points to a 10-percentage point drop in the number of Americans who say they are in the middle or upper-middle class to 51% today from 61% from 2000 to 2008. At the same time, according to the Bureau of Labor Statistics, the percentage of the total U.S. adult population that has a full-time job has been hovering around 48% since 2010 at a time when the population of working-age people has expanded. “This is the lowest full-time employment level since 1983,” he wrote.

His solution: “America needs small business to boom again.”

You May Be Spending Too Much on Gas. If you’re pumping premium gasoline into an auto that doesn’t require it, thinking it may help the health of engine, stop it already. You’re losing money, according to AAA’s new research, to the tune of $2.1 billion collectively in one year. What’s more, you’re helping drive the price of premium gas, which costs about $0.46 cents a gallon more so far this year, according to the Energy Information Administration. Know how much more it was from 2010 to 2014? Only about $0.29 more per gallon.

Know what else? Some 16.5 million U.S. drivers fill ‘er up with premium when it’s not necessary, according to AAA. If your car is designed for regular gas, putting premium in will not—let’s repeat that, will not—improve fuel economy, cut tailpipe emissions or rev up horsepower, AAA’s study found. Only 16% of those on the road own cars that require premium gasoline, and they’re usually luxury autos, while an overwhelming 70% of drivers own cars designed for regular gasoline.

Feeling Sad? Your Home Might Cheer You Up. Yup, your home may one day be able to tell if there’s family stress and start playing pleasant music to relieve it. That’s the word from researchers at the Massachusetts Institute of Technology, who unveiled a device that uses wireless signals to diagnose emotional changes through “patterns of respiration, cardiac rhythms, and minute variations in the length of each individual heartbeat," according to the Wall Street Journal. “All of us share so much in how our emotions affect our vital signs,” said Dina Katabi who worked with colleagues at the university’s Computer Science and Artificial Intelligence Lab to develop the device. “We get an accuracy that is so high that we can look at individual heartbeats at the order of milliseconds.”

Still experimental, the so-called EQ-Radio is a radar system using wireless signals that gather and quickly analyze those vital signs to determine mood. The group claims 87% accuracy at distinguishing happy moods from sad ones, angry from content, according to WSJ. In other words, the walls might really be able to talk. “We have explored this idea of allowing a home to recognize someone’s emotions and adapt to it,” project researcher Fadel Adib told WSJ. “The idea is to enable you to seamlessly interact with your home.”

Good Trading,

JJ

@TDAJJKinahan

Economic Calendar

FIGURE 2: THIS WEEK'S ECONOMIC CALENDAR

Source: Briefing.com

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