Wednesday, July 20, 2016

The Fed May Want You To Know There Is A Rate Hike Coming INDEXSP:.INX

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*We reported last night that the Fed was royally stuck.
*Through The Wall Street Journal, it appears the Fed wants to confirm a hike for September or December.
*Thursday's jobless claims will be a key driver for how it frames its post-meeting FOMC commentary next Wednesday.
*The Fed cares very much that the Street is aboard. If it sees a strong jobs number, it may hint more strongly at a rate hike.
We wrote yesterday that we think the Fed's hands are tied. If it raises rates, it will crash the markets, and if it cuts, it will jump inflation higher. That did not change, from our perspective. What is new is that through the Wall Street Journal ("WSJ"), the Fed is reiterating its desire to raise in September or December. We think the Fed's post-FOMC commentary will reflect this Thursday's jobless claims report. A rate hike would be a giant risk to the stock market (NYSEARCA:SPY).
First let's review what the Fed said through the Wall Street Journal.
  • Rate hike, "possibly as early as September"
  • Rates likely "unchanged when they meet July 26-27"
But for all of us, this is the real key. Please pay attention to what the Fed says here.
"But the message in their post meeting policy statement could be that the economy is on a more solid footing than appeared to be the case when they last gathered in June, setting the stage for raising rates if the data hold up in the months ahead. Such a message would get the attention of traders in futures markets, who see low chances for the Fed moving as early as September."
The Fed Cares What We Think, And Depending On Jobs Thursday, Will Want To Make Sure We Know A Hike Is Coming
For us, that's the key message we believe the Fed leaked to the WSJ. The Fed constantly cares what the market thinks. It does not want to surprise markets. It has also credited itself for having talked the markets higher.
Fed Funds Futures are mentioned in the minutes regularly. The Fed cares that we are all aboard.
There is one problem right now. Nobody believes the Fed.
For that reason, if the Thursday jobless claims are decent, we have a strong feeling the Fed will get the message out next week that it wants to raise rates. That will be, for us next week, a negative market event.
Here's a look at the Fed Funds Futures for December. The spike up was on June 24th, where a rate hike jumped "off the table." (Up means less chance for a rate hike. The Future is calculated 100 minus the expected rate in the future. Up means less chance.)




Chaim Siegel has been working with hedge funds and mutual funds as an analyst and PM his entire career. Chaim specializes in earnings and predicts, analyzes and reacts to earnings and earnings events as well as developing current company stories with a hedge fund perspective. If you want his analysis real time sign up to the right for real time email alerts. #in, $spy, $qqq, $iwm, $vxx, $ycs, $fxe, $EUO, $YCS, ^GSPC, INDEXSP:.INX, #elazaradvisorsllc, CME Globex: ES Disclosure: These trades can lose you money and principal especially when using leverage BY USING THIS SITE YOU AGREE TO TAKE ALL RESPONSIBILITY FOR YOUR OUTCOMES AND LOSSES AND HOLD BESTIDEAS, ITS CONTRIBUTORS AND ELAZAR ADVISORS, LLC HARMLESS