New ideas for the Fed

  Since October, every time the FED talked (and that’s many times), the
market reacted positively. Maybe they should have “The FED
Cable Channel.” Maybe they should have “The FED IPod.”  How about “The FED
Phone?” Just turn it on and you will hear someone from the FED telling you
how perfect everything is. Maybe they could just have the show “THE FED
Idol.” Every week, each of the FEDHEADS come out and try to top each other
with pollyanish talk that everything is perfect. That way, the market will
ramp up every day. We do not quibble with the FED thinking everything is
perfect. They are a lot smarter than we are. In fact, they are right. There
isn’t any inflation. (clear throat) There isn’t a problem with HOUSING.
There isn’t a problem with budget deficits, trade deficits, debt,
derivatives…everything is just wonderful. Our problem…and there is no
doubt in our mind…is that one day one of them is going to say something
the market does NOT like…and this could potentially cause a severe
dislocation. We do not believe the FED was invented to open their mouth on a
daily basis…and that is what they are doing. There is not a day that goes
by that Yellen, Poole, Bernanke and the rest do not yap away. We hope we are
wrong about the outcome. 

 

The latest FEDSPEAK ramped the market in a big way
Tuesday. Major indices got back most of the 3-4 weeks of a nominal
correction in one day. Volume was heavy. Normally, this is a bullish
occurrence that will lead to upside testing. Even though we have been
negative on many groups, we have told you that until support is broken, the
market gets the benefit of the doubt. The fact the market held right where
it needed to led to this move.

 

Nothing changed in all the COMMODITY sectors. They
continue to ramp to the upside regardless of extended conditions. The main
changes we saw on Tuesday were in the INTEREST-RATE sensitive areas.

 

HOUSING popped from their recent oversold drubbing.
Volume was heavy. The move started one minute after the FED yapped.

UTILITIES also ramped off their lows. UTILITIES have
been in a downtrend since October. Finally, the REITS bounced over 2% after
their recent drop. We believe there is a chance that today’s action in these
areas put in a decent low…not to be taken out in the short-term. This can
only help the market as INTEREST-RATE sensitve stocks make up over 30% of
the S&P.