Bear Mountain Bull

It’s time again for a little BMB R&R, especially with the market behaving as bizarrely as it’s been. Maybe if we stop watching it start to behave a little better…

Posting will be very light and variable over the course of this week, but we’ll put up an open thread each market day for our readers to comment on the day’s market activity or to post any interesting links they might run across.

Check the space below for whatever the latest might be during this ‘off’ time, and please visit the various sites in the ‘Links’ and ‘Regular Stops’ for up-to-date market news and analysis.

BMB will be back in full swing by next weekend.

As BMB noted in the comments section of today’s wrap, he was hoping not only that the market would become a little less Fed-phobic, but that the media discussion of the Fed would quiet down as well.

But alas, with the ink on today’s FOMC statement not even dry yet, his hopes are already dashed. They’re already talking about what the Fed will do next time…

Sigh.

The recent breakdown in the transportation stocks remains a huge cloud hanging over this market. Today, the Dow Transportation index registered another new relative low closing level, and remains stuck below its 200-day moving average.

Chart courtesy of StockCharts.com

So, finally, Fed day has come and gone - but the announcement of a pause in rate hikes wasn’t exactly met with trumpets and party hats. The Fed is done - for now - but I think the market has finally moved on.

Prices were slightly higher at Fed time, and rallied a bit after the announcement, but that soon faded and stocks headed lower, then turned back up a bit into the close. The Dow 30 closed down 46 points (-0.4%) at 11174, the S&P 500 dropped 4 points (-0.3%) to 1271 and the Nasdaq fell 12 points (-0.6%) to 2061. The small-caps suffered a little more, sending the Russell 2000 index down 9 points (-1.2%) to 687. The Dow Transports fell another 0.7% while the Utilities gained 0.7%. Bonds were mixed, sending some yields up and some down: 6-month 5.14%, 2-year 4.90%, 5-year 4.84%, 10-year 4.92% and 30-year 5.02%.

Market internals were negative, and volume increased from yesterday’s low levels. Advances trailed declines by 5 to 7 on the NYSE and 1 to 2 on the Nasdaq, with up/down volume 1 to 2 on the NYSE and 2 to 3 on the Nasdaq. New highs/lows were 87/74 on the NYSE and 51/140 on the Nasdaq.

Update: I completely forgot the group rundown. How lame is that? Anyway, here goes — In the groups, not a lot of green, with utilities leading the short list with a gain of 0.9%. Leading the much longer list of losers were the housing stocks (-2.5%), disk drives (-2.3%), transportation (-1.7%), REITs (-1.6%), airlines (-1.5%), retailers (-1.5%), steel stocks (-1.4%), oil services (-1.3%) and gold and silver stocks (-1.1%).

Energy prices were mixed with crude down 67 cents to $76.31/barrel and gasoline down a couple of cents to $2.23/gallon, but natural gas moving higher to $7.16/mmBTU. The dollar took an initial hit on the Fed news, but recovered and the dollar index was unchanged at 84.74. Gold was down a few bucks to $645/ounce and silver down 6 cents to $12.18/ounce.

BMB Note: The hugely anticipated Fed announcement didn’t seem to come as much of a surprise, and it reacted as though it didn’t really mean much - I think after Friday, it was already baked into the cake.

So what happens now? The market doesn’t have a lot of news to play with this week, and earnings season is winding down, so that doesn’t leave much for a catalyst, in either direction. Not to mention that we’re kinda in the dog days of summer trading here, so there isn’t a huge amount of interest. Hard to say where that will take us.

It seems that in the very near-term, the bias has turned more negative again, and that could work in conjuction with the downward intermediate term trend to bring about some movement to the downside. We’ll have to see if any momentum will get built up in that direction. As for hope on the up side, it seems that most of the steam has been lost from the move up off the mid-July lows, and without Fed hope for fuel, I’m not sure what might drive this market higher.

From what I heard in the statement, they certainly didn’t close the door on future rates hikes, and seem to be depending on a moderating economy to keep inflation in check.

The vote was not unanimous, with one Fed member voting to raise rates another quarter-point.

In these first few minutes, market reaction has been quite muted. I still think this news has been priced in since Friday…

Here is the text of the FOMC statement.

Update: A slight initial bump in the market has already faded, and the majors are now slightly in the red.

As expected, the action is pretty subdued ahead of the afternoon Fed news. The indices are holding just above the flat line, with A/D lines slightly in the green. Action in the groups is mostly positive, but without any big numbers. Bonds are drifting a little lower, yields up.

Crude oil has pulled back somewhat from its big run yesterday, and gasoline is back below $2.20/gallon for the first time in a while. The dollar is slightly lower, gold and silver near unchanged.

As if we didn’t already know: Deron Wagner reminds us that the driving force behing today’s action will be the Fed. But don’t bother to try and guess what will happen, or how the market will react:

The driving factor that will move the markets in today’s session is whether or not the Feds raise interest rates again. This time, Wall Street is divided on whether or not we will see another quarter-point hike in the Federal Reserve Rate. We feel that speculating on the market’s reaction to either scenario is foolish and a waste of time. Instead, we will treat the news as we always do by trading the market’s reaction to the pending interest rate announcement rather than anticipating what will happen. Rarely does the market react in a logical way, so astute traders should lay low on the sidelines, waiting to pounce in either direction.