Why I think the Fed will keep raising rates
The major
indexes finished mixed last week in a fairly quiet week of trading. Overall,
market players appeared to lack conviction ahead of the March 28th FOMC
meeting. This led to rotation between sectors throughout much of the week, as
few trends materialized. The one positive was that the equities markets held
their own again in the face of rising crude oil and multiple profit warnings.
It should also be noted that the Russell 2000 index was able to post another new
all-time closing high on Friday, as small-cap shares were back in their
leadership role.
Much like
in the past several weeks, market direction was dictated by Fed comments in
recent days. While the Dow and S&P 500 have achieved breakouts, the average
stock has largely traded sideways (when using breadth as a guide). I would
suspect this sideways action is simply a direct result of uncertainty over
monetary policy. Given the action in Financial shares, one would think that
Tuesday’s expected rate hike will be the last for the cycle. On the other hand,
this is at odds with the Fed Funds futures, which are currently suggesting at
least 2 more hikes. Because of the Fed’s history, mainly due to Greenspan, of
not stopping until either a crisis and/or economic slowdown unfolds, I would bet
that rate hikes beyond Tuesday are pretty much a given. And, as a result, it
would not surprise me if the uncertainty that has persisted recently in the
equities market just continues after Tuesday’s Fed announcement.
Daily Pivots for 3-27-06
| Symbol | Pivot | R1 | R2 | R3 | S1 | S2 | S3 |
| INDU | 11280.05 | 11316.01 | 11352.05 | 11388.01 | 11244.01 | 11208.05 | 11172.01 |
| SPX | 1302.79 | 1306.69 | 1310.43 | 1314.33 | 1299.05 | 1295.15 | 1291.41 |
| ES M6 | 1312.17 | 1316.83 | 1320.92 | 1325.58 | 1308.08 | 1303.42 | 1299.33 |
| SP M6 | 1312.13 | 1316.77 | 1320.73 | 1325.37 | 1308.17 | 1303.53 | 1299.57 |
| YM M6 | 11349.33 | 11388.67 | 11426.33 | 11465.67 | 11311.67 | 11272.33 | 11234.67 |
| BKX | 107.86 | 108.24 | 108.61 | 108.99 | 107.49 | 107.11 | 106.74 |
| SOX | 502.61 | 507.15 | 509.46 | 514.00 | 500.30 | 495.76 | 493.45 |
Please feel free to email me with any questions
you might have, and have a great trading week!
Chris Curran
Chris Curran started his trading career at the
age of 22 with a national brokerage firm. He combines fundamental and technical
analysis to get the big picture on the market. Chris has been trading for 15
years, starting full time in 1997, and has never had a losing year as a
full-time trader.