Fed....Rates Low Seemingly Forever....Or Not

In her statement, Fed Chair Yellen said that rates would remain low for a long time to come. But in her Q & A session afterwards she said she would raise rates in the next couple of months, if need be. Too many dissenters among the other Fed Governors. Three wanted a rate hike immediately. I think she's feeling the pressure to raise those rates, and, although it's clear she doesn't want to, the pressure may get so that she gives in and begins a rate-hike cycle.

So wouldn't that be the end of the bull run? When the news came out the S&P 500 fell 10 points within minutes, only to recover those losses and add some on to the plus side by the time we closed. Why? There are a few reasons, but mostly because it signifies that maybe things are improving enough economically in the United States, and so it may be looked upon favorably. Remember folks, there's no reality to the stock market. It's simply a game of human emotion, and if those emotions want a market higher they can spin things however they want. Never look for logic in the stock market simply because emotions are usually illogical when it comes to money. In other words, don't think. See! If the charts are fine then the charts are fine.

So today we rallied back nicely with the market closing near the highs. A bit of a tail off the 50-day test but more on that in a bit. The market liked the Fed because it wanted to. Now the market needs a follow through back through the 50's. Not an easy market. It's not supposed to be.

The 50-day exponential moving average on the S&P 500 is at 2017. We're near 2013, so it wouldn't take much to get through on a closing basis, but that's the key. A decently forceful close above the 50's. Intraday is meaningless. It's not unthinkable to wake up tomorrow to a huge gap lower. Anything goes in this market. The bulls need to establish a move back over those lost 50's while one would think the bears will do everything in their power to keep it below. The fight will be an interesting one. Things aren't easy for either side, but the big picture is still one of a bull market.

Something very interesting occurred today that doesn't happen all that often. Traders were loading up, and I mean really loading up, on puts, or bets that the market would go lower. The put-call ratio hit a very rare and extremely pessimistic level of 2.02 in the opening hour. That would normally called cathartic. Way too much pessimism in the very short-term, and can give the market a decent rally short term. Nothing is etched in stone, and, thus, no guarantee but seeing so much pessimism in the very short-term would normally mean the bears are in a bit of trouble.

This run's contrary to the bigger-picture-sentiment situation, which, amazingly, showed no increase in the number of bears after last week's fall on the averages. The bull-bear spread is still a very optimistic 34.6%. That's bad news for the bulls, but, again, very short-term we saw a cathartic run of pessimism this morning at the open. Yesterday seemed to get many to finally give up their bullish stance. The put-call dropped after the first hour, but still showed extreme levels of pessimism with readings in the 140's afterwards. We shall see what the bulls and bears can do, but now the bulls have a shot at taking back those lost 50-day exponential moving averages. They need to do so quickly, but they have a real shot now. We shall see.

In the meantime nothing is safe. Neither side is in control. Go slow.