Wednesday, January 28, 2015

Yellen's Analysis Paralysis

The Market Trend Model ( moved to a negative bias on Wednesday as the market turned its attention to earnings guidance and Janet Yellen after the short lived European Central Bank rally fizzled. 

It appears the market may be discounting a peak in earnings as a multitude of headwinds have blown into the picture, not the least of which are dollar strength and a lack of demand for oil. In fact the world is drowning in oil as the U.S. Energy Information Administration said U.S. crude stocks rose by 8.9 million barrels last week to 406.73 million barrels, the highest level since records began in 1982.  If one gauge of an expanding economy is energy demand, where is the demand?

Janet Yellen's Federal Reserve seems to have painted itself into a corner as its "transparency" looks to me like a whole lot of analysis paralysis.  Today the Federal Open Market Committee released its statement and in a unanimous vote the FOMC said, "the Committee judges that it can be patient in beginning to normalize the stance of monetary policy."  If the economy is expanding why does the Federal Reserve see the continued need for its historic easy money policies?

And the $1 question: if economic expansion has slowed or is about to turn negative, what in the world will Yellen and The Fed do next...QE infinity zombie apocalypse?

Whatever answers exist for the questions above, one thing is clear: at the moment stocks are under distribution.