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Market Update

Market Direction Is Important –

Updated Chart of the S&P 500 and Secondary Signals

Of our Four secondary indicators under our MTI:

  1. Relative Strength Index (RSI)-Positive

  2. Chaikin Money Flow (CMF)-Positive

  3. MACD- Positive

  4. Money Flow Index-MFI-Positive

More on the Market and the Economy:

After a rally on Wednesday following the Fed’s meeting announcement, stocks snapped a three-week losing streak on Friday, as the S&P 500 rallied to post a 2.7% gain for the week.

Source: dshort.com

Small cap stocks, which have recently outperformed, continued to soar, and the Russell 2000 extended gains to hit a record for the third day in a row on Friday.

This week will see the release of data on existing home sales, new home sales, inflation, durable goods and GDP.

While the Fed took another step toward a rate hike by dropping the word “patient” from the FOMC meeting announcement last Wednesday, Fed Chair Janet Yellen stated that “just because we removed the word patient from the statement doesn’t mean we are going to be impatient”. And based on the Fed’s ‘dot plot’, which maps officials’ expectations of rates over several years, the central bank will increase rates for more slowly than previously projected. The latest dot plot shows that officials expect the median fed funds rate, now near zero, to rise to .625% by the end of the year…down sharply from the 1.125% predicted in December. The slower pace of rate hikes is likely due to the Fed’s outlook for economic growth: the central bank trimmed its expectations for growth to 2.3% to 2.7% this year, and noted in its statement that “economic growth has moderated somewhat”.

Source: Federal Reserve

The Federal Reserve reported on Friday that it handed the Treasury Department a record $96.90 billion in 2014, after sending over $79.63 billion in 2013. The Fed’s revenues are used to cover its operating expenses, and a bulk of the rest goes to the Treasury to help fund the government. According to Friday’s report, the central bank’s assets totaled $4.498 trillion at the end of 2014.

The Conference Board’s Leading Economic Index rose .2% in February, as “widespread gains among the leading indicators continue to point to short-term growth”. However, the Board also noted that “we may be entering a period of more moderate expansion. With the February increase, the LEI remains in growth territory, but weakness in the industrial sector and business investment is holding economic growth back, despite improvements in labor markets and consumer confidence”.

After being suspended over a year ago, the federal debt limit was reinstated last Monday. The limit was back in effect at $18.133 trillion, and the Treasury reported on Tuesday that the government’s total borrowing stands just $25 million below that. Before the limit was reset, the Treasury began taking steps to extend the government’s ability to borrow, followed by “extraordinary measures” to generate additional cash to fund the government.

The government is the number one problem in the US, followed by the economy and unemployment, according to Gallup. While 18% named the government as the top problem (for four months now), 11% cite the economy and 10% cite unemployment.

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