The market should get a bit of a lift from the Fed comments released today, May 2 2018 at 2:00 PM.
The Fed indicated that while they expect inflationary pressures to remain, they see interest rates staying below normal for some time. That is significant for stocks and for earning more profits in my portfolio this year. It should definitely impact May and keep the month positive.
On a 12-month basis, both overall inflation and inflation for items other than food and energy have moved close to 2 percent. Market-based measures of inflation compensation remain low; survey-based measures of longer-term inflation expectations are little changed, on balance. They indicate the labor market is still strengthening and economic activity is rising at a moderate rate.
Recent data suggest that growth of household spending moderated from its strong fourth-quarter pace, while business fixed investment continued to grow strongly.
All of this points to a stock market that little chance of entering a bear market as bear markets have never appeared in a cycle of expansion which the economy continues to experience.
SPX Should Hold 200 Day
The S&P should be able to hold the 200 day moving average for May based on the information contained in the Fed report which shows a growing economy with low unemployment, low inflation and low-interest rates. The 200 day is just above 2600 on the S&P which should mean that for the month of May, the lows from February should not be revisited. This places the strategy of buying the dips, squarely back in investors’ hands.
The Bollinger Bands Squeeze that I have followed should end with the S&P breaking higher. Whether there will be new highs in the S&P is doubtful for May, but a trading range between 2800 at the high side and 2600 on the low side is more than enough to continue to generate profits for my portfolio.
SPX 6 Month chart After Fed Report – May 2 2018
Overall I would say the Fed report fits in well with the economic outlook. On Friday we will get the April unemployment numbers. That should be an interesting report.
My Getting Ahead Of The Fed Strategy Trades should end profitably, following the Fed report released this afternoon. I will also be setting up a trade ahead of the unemployment report on Friday.
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