Message of the Markets

The Federal Reserve will conclude its meetings Wednesday afternoon with a decision on the Fed Funds Rate. The consensus is the central bank will lower the Fed Funds Rate a quarter point. I cannot quarrel with a quarter point reduction and although I recently called for the resignation of Chairman Bernanke, I think the FOMC has been right on target after a late start on rate reduction and in the Bear Stearns intervention.

Before today, I was leaning toward holding firm on the funds rate as I felt assisting the dollar carried more significance. Inflation, although not the major issue the media makes it out to be, is a factor. A far more important factor is the dollar value versus other currencies and in recent weeks the dollar has drawn a line in the sand. Today, many commodities, leading commodity oriented stocks, gold and oil retreated.

The DOW, NASDAQ and S&P 500 all are positioning to move higher in prompt fashion, possibly much higher. The stock market is a leading indicator and it is signalling that things are improving. See the below chart of the S&P, clearly flashing an ascending triangle formation and about to break higher. A reverse head and shoulders, also a bullish signal, could be argued as well.












The FED will likely be one and done, a quarter point cut and then pausing, before potentially reversing field and hiking rates later in the year if inflation continues ascending. If you are ready to purchase a home, the time is now as home pricing is not falling farther, the dollar is strengthening, commodity pricing is receding, including oil which will lead to increased disposable income for the consumer. Don't let the media dictate your direction, let the market. The psychology is about to change and greed is overtaking fear. People get ready!