As expected, the Fed announced yesterday that interest rates would remain at their historic low levels. Normally, this should have cheered investors, but this time it was interpreted (correctly) that it was simply a sign of the economy struggling.
Fears have been increasing lately that we might slip back into a recession, which would postpone any rate increases for at least a year or so. Retail sales have been weakening with sluggish demand and no improvement for increased employment in sight.
Contributing to the initial selloff was the news that new-home sales plunged by more than one third in May to 300,000 units, the lowest since record keeping started in 1963. That should have come as no surprise as the home buyer tax credit expired at the end of April.
The markets more or less meandered aimlessly but managed to keep losses to a minimum as the chart above shows. Our domestic Trend Tracking Index (TTI) edged slightly higher and has now moved +1.87% above its long-term trend line.
The market appears to be stuck in this range with the S&P; 500 hovering around the 1,100 level. A breakout will occur sooner or later, and we will have to wait and see if it will be to the upside or if overwhelmingly negative economic news will pull the domestic TTI finally into bear market territory.
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