Fed Minutes Remove Rate Fears... Stock Market Sentiment Terrible Again......

By: Jack_Steiman

The one fear the bulls have more than anything is hearing from the Fed that a rate-hike cycle is about to begin. Any hint towards that reality would be bearish for the bulls short to mid-term, and they know it the way they know day turns to night. They know that the market can handle one rate hike as long as it's accompanied by a statement that alleviates the fears of a new cycle of hikes. The bulls know the Fed is being pressed in to raising rates by many other Fed Governor's, thus, the bulls could deal with a single hike but again, anything pointing to a cycle of hikes would be the kiss of death for this bull. So the fed minutes came out and she said any premature increase in rates could hurt the economic recovery. Wonder why she would say such a thing a I laugh out loud.

She knows that if people start to get bad numbers from their 401K's the economy will nose dive, thus, she's trying to protect the stock market in any way humanly possible, thus, her statement today saying she won't be doing any hikes soon and if she's forced to do one, that will be it. The market loved this. It needs to sell from overbought but that statement made it more difficult to do so. You have to hand it to her. She knows the recovery we're dreaming of just isn't taking place. The latest numbers from durable goods, GDP and the ISM Manufacturing report we're simply awful, showing no tendency towards any meaningful economic recovery. The jobs reports are also showing gains in lower paying jobs and part time jobs, not the type of jobs created when new, larger businesses are forming and doing well. The Fed is anxious and protecting. It is what it is, like it or not. The bears hate and understandably so. Is it fair? Not at all but this game isn't nor has it ever been about fairness. Following the actions of the fed has paid off by remaining bullish until now. Stay with that until the dancing stops.

The new bull bear spread is out and the bulls are still feeling the pain of the reading. 42.4% spread. Here we go again with froth ramping to extremely dangerous levels. The fed is protecting but even with that we have seen this level of the spread create two pullbacks. One of 5% with one just shy of 10%. It can happen without notice. The bulls are running low if not out and that makes things dangerous if the bears can muster up a little bit of a fearless attitude. They've been burned so many times that's clearly not an easy thing to do. Bears are down to 14% and that's incredibly anemic. We need more bears one would think for sustainable upside action but for now the actions of the fed have the bears on hold but again, the market doesn't have to give notice for a strong selling episode to begin. It's been over a year now with only two weeks the exception that we've seen 30+ on the spread. If the Fed wasn't in protect mode this market would be getting its head handed to it. Just recognize that we are dealing with extreme levels of froth that shouldn't be taken lightly meaning if you do play long, play the best earners and play the leading, non-frothy type stocks.

Short-term charts could use some work to the down side to alleviate overbought conditions but when markets are on breakout it's nearly impossible to time when that pullback will occur and just how far it will unwind. Quite often you wait for oversold to occur but you don't quite get there before trying higher again. The market also seems to have, for the most part, shaken off the entire Greece situation. You shouldn't be afraid to play the best as I've mentioned but if we get a selling episode out of the blue it may only be the need to unwind those short-term sixty-minute index charts. With froth a headache as well, remember to respect the game and keep things appropriate.

Peace,

Jack

Jack Steiman is author of SwingTradeOnline.com ( www.swingtradeonline.com ). Former columnist for TheStreet.com, Jack is renowned for calling major shifts in the market, including the market bottom in mid-2002 and the market top in October 2007.

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