• 13 hours Feds Target Forex Company In $75 Million Ponzi Scheme
  • 16 hours The Surprising Catalyst Sending Some U.S. Home Prices Soaring
  • 19 hours Is The Global Bond Bubble About To Burst?
  • 21 hours Investors Are Piling Into Tax Exempt Municipal Bonds
  • 2 days Strong U.S. Dollar Weighs On Blue Chip Earnings
  • 2 days How Millennials Are Reshaping Real Estate
  • 2 days Is America's Love For Cars Fizzling?
  • 2 days Increased Solar Demand Could Spark Silver Buying Spree
  • 3 days Amazon Calls It Quits On Alibaba’s Home Turf
  • 3 days Market Euphoria Weighs On Gold
  • 4 days Did Facebook Just Become ‘Uninvestable’?
  • 4 days Electric Vehicles Are Reshaping The Mining Industry
  • 5 days Buffett, Dimon Voice Support For Stock Buybacks
  • 5 days Newmont Goldcorp Now World's Top Miner After Sealing The Deal
  • 6 days Canopy Growth Eyes U.S. Pot Producer In $3.4B Takeover Deal
  • 6 days U.S. Slaps New Sanctions On Cuba To End ‘Glamorization Of Communism’
  • 6 days The Unstoppable Electric Bus Revolution
  • 6 days Pinterest, Zoom Launch Much Anticipated IPOs
  • 7 days Marijuana’s Bizarre Bottleneck Isn’t What You’d Expect
  • 7 days Climbing Stocks Weigh On Gold, But A Turnaround May Be Near
Tesla Struggles To Compete In European Market

Tesla Struggles To Compete In European Market

Tesla continues to catch the…

How Millennials Are Reshaping Real Estate

How Millennials Are Reshaping Real Estate

The real estate market is…

Elliottwave-Forecast

Elliottwave-Forecast

Elliottwave-Forecast

Elliottwave-Forecast.com (by EME PROCESSING AND CONSULTING LLC) was founded in 2005 by Eric Morera. Since inception our company has provided tailored Financial Market Services to…

Contact Author

  1. Home
  2. Markets
  3. Other

Hawkish Fed May Trigger Equities Correction

The May 18th FOMC Meeting Minutes contains direct references to a potential rate hike at the next June 14 - 15 FOMC meeting. Recall in March meeting, the Fed Dot Plot chart (see below) suggests that Fed believes two rate hikes this year is the likeliest outcome, albeit with the usual data dependent clause.

Fed Dot Plot

Since the beginning of the year, market participants are trying to assess if U.S. data justifies more rate hikes and if so, which month. U.S. data this year has been rather mixed. Labor market conditions have continued to improve although growth in GDP appeared to have slowed. U.S CPI in April increased to 3 year high of 0.4%, up from 0.1% increase in March, due to the rise in gasoline and food prices. Overall, with market stabilizing since the beginning of the year, and economic data continues to paint a consistent slow recovery, the Fed is still on the path to tighten the monetary policy.

In regards to timing, there's another potential big market moving event in June 23rd. The UK Referendum is going to decide whether the British people want to stay in or outside of the European Union. Initially, it was believed that the Fed likely would not make a rate hike move this June before getting clarity on the outcome of the U.K referendum. Thus, the month of July is more favorable for a rate hike.

However, the May 18th FOMC minutes suggests that rate hike as early as June is not off the table. Further interviews with several Fed members since last week also suggest that June rate hike is possible. St. Louis Fed President James Bullard specifically says that the UK referendum will not affect the Fed's upcoming decision on rates. Fed Funds future has since snapped higher to 36% from just 12%, indicating increased rate hike expectation for the upcoming June meeting. With a hawkish Fed and US rate hike expectations rose sharply, global equities may continue lower in the next 1 or 2 months.


Technical Analysis

S&P500 and VIX Chart
Larger Image

VIX Index is looking to form a low. The Index has broken the trend line from 8/24/2015 peak and showing a possible inverse head and shoulder pattern. A break and close above 17 may suggest a significant rise in volatility, and it's likely accompanied with S&P 500 breaking below 2030.

 


If you enjoy this article, feel free to read other technical articles at our Technical Blogs and also check Chart of The Day. For further information on how to find levels to trade SPX, ES_F, DAX or other indices, forex and commodities using Elliottwave, take our FREE 14 Day Trial. We provide Elliott Wave chart in 4 different time frames, up to 4 times a day update in 1 hour chart, two live sessions by our expert analysts, 24 hour chat room moderated by our expert analysts, market overview, and much more! With our expert team at your side to provide you with all the timely and accurate analysis, you will never be left in the dark and you can concentrate more on the actual trading and making profits.

 

Back to homepage

Leave a comment

Leave a comment