Wednesday, April 29, 2015

Yellen? Yellen? Yellen?

The Market Trend Model (http://bitly.com/M_Trend_Model) is slowly moving to a negative bias with the Russell 2000 (http://scharts.co/1b4HG2p) leading the market into a nascent downtrend. Both the Nasdaq(http://scharts.co/1HAtavT) and the S&P 500(http://scharts.co/1b4JwQD) appear ready to roll over just days after breaking out to new record highs.

A perfect storm may be brewing with the U.S. economy slowing and the Federal Reserve left with nowhere to go as ZIRP (zero interest rate policy) becomes a major liability rather than the stimulative force it once was.  The Federal Open Market Committee statement (http://www.cnbc.com/id/102632303) released today confirms my ongoing premise that Janet Yellen and the Federal Reserve have absolutely no idea what they are doing from meeting to meeting.  According to CNBC, "The Federal Open Market Committee on Wednesday offered no changes to its zero interest rate policy.  Not only did it not hike rates, it also removed all hints for what may lie ahead.  Calendar references were deleted completely from the post-meeting statement."  The uncertainty created by The Federal Reserve simply gives market participants another reason to sell stocks.

As I commented about the Nasdaq in last weekend's blog posting, "The small black doji candlestick on Friday could portend lower prices on the immediate horizon for the Nasdaq index just as similar patterns led to lower prices on 11/28/14, 12/29/14, and 03/20/15."  Sure enough, after a Monday morning gap up open the Nasdaq has declined almost 100 points in the last three days.

A the moment prudence and caution are warranted as sellers appear to be in control of the market indexes.