The Fed Has Tried Both Sides
Last Thursday, the Federal Reserve did not raise interest rates. While the "no
rate increase" scenario is typically favorable for stocks, the S&P 500
was unable to hold onto the post Fed statement gains. In fact, rather than
rising after the Fed statement, the S&P 500 has seen a big drop in recent
sessions (see chart below).
Let's See How The Other Side Looks
In what appears to be a bit of a panic response from the Fed, after Friday's
big selloff in stocks, several Fed officials came forward making the case for
increasing interest rates. Did the market cheer the Fed flip? No, the initial
reaction was positive, but like last week, the gains were quickly given back
(see below).
How Does The Bigger Picture Look?
While markets can begin to improve at any time, the facts we have in hand
are not particularly encouraging for stock market bulls. This week's video
shows why stocks may be set up for another big leg down.
Have Things Improved This Week?
After Tuesday's session, the S&P 500 was down 15 points this week, meaning
it is difficult for improvement to occur on weekly charts. If we use the image
below to compare the end of the 2011 correction and the 2009 bear market low
to the present day, we can see the stock market bulls have some work to do.
If you want to get some insight into the three "looks" above, see Comparing
2015 To Past Market Bottoms
Improvement Can Begin At Anytime
2011 is an excellent example of a vulnerable market that began to improve
quickly after a low was made. The charts looked ugly on October 3, 2011, but
improved dramatically in the weeks that followed the October 4 intraday reversal.
With Janet Yellen speaking Thursday, it is important for us to monitor the
charts with a flexible, unbiased, and open mind.
