The Morning Call
12/18/14
The Market
Technical
Helped
along by a more dovish than expected Fed statement, the technically oversold
market bounced early in the day and then short covering pushed on the
afterburners in the afternoon. Both
indices (17356, 2012) closed back above their 50 day moving averages and the Dow
finished back above its former high support level---which are quite positive. However, before we can assume that the
current downtrend is over, the Averages, at the very least, have to trade back
above the upper boundaries of their developing very short term downtrends (circa
17483, 2023).
***overnight,
the Swiss central bank imposed negative interest rates on foreign capital
inflows. For all practical purposes that
is an easing move on top of the Fed meeting.
The
main reason for the euphoria over the Fed statement/Yellen news conference was
that (1) the Fed weaseled its way out of corner---raising interest rates next
year. Not that it won’t lift rates next
year, it just gave itself more room not to without looking like is changing its
policy and (2) Yellen downplayed the decline in the price of oil and its
potential impact on the economy and the banking system---which as you know has
been a driving force behind the recent Market decline. How you can be so nonchalant about a 50%
reduction in the price of one of the primary economic inputs and its impact is
frankly a bit unsettling. Her statement
is very reminiscent of a similar one by Bernanke in 2008 about how little risk there
was in the housing and mortgage markets.
Not that all will turn out the same; but the circumstances seem hauntingly
familiar.
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