Yahoo Finance The Bank of Japan could move markets before the Fed: trader
By Alan Valdes, Director of Floor operations at Silverbear
It was another volatile day on the NYSE yesterday, and slightly less so today. At one point, we were up over 100 points on the Dow Industrials (^DJI), but we ended the day up barely 10 points. With mediocre volume, traders, as usual, are waiting for the Fed’s announcement on Wednesday.
Like I have said before, we will get another pass. The Fed will stay put until December. This fed is data dependent on raising rates. The fact is the data is not consistent to justify a rate increase at this time. After printing in the neighborhood of $13 trillion worth of cheap money and getting very little to show for all that counterfeiting, it seems confidence in the Fed among many Wall Street professionals is eroding.
Central banks no longer lead the markets
It would also seem, the days of central banks leading the markets are a thing of the past. As we witnessed early in the month when the Fed just spoke about raising a quarter of a point, the markets punished them for thinking such nonsense, as they quickly showed their displeasure and sold the Dow down -300 points.
Now I, for one, would like to see the Fed raise rates when the time is right. But with a little over 1% GDP growth and inflation below the Fed threshold of 2%, they would only embarrass themselves. The betting for a December hike is 50%. But December is a long way away (with a small election in between).
Watch the Bank of Japan
The markets will tread water until the announcement on Wednesday. While most eyes will be focused on the non-event of the Fed announcement, the big surprise may come from the Bank of Japan. This is the wild card on Tuesday night / early Wednesday.
Most on the Street are looking for the BOJ to continue its asset purchases and negative interest rate policy. Negative interest rates are a desperate move and one of the last tools in the bank’s tool box. It has not really worked that well yet.
They may announce quantitative easing and purchase equities, but no one is quite sure. To make matters more convoluted, the Nikkei will be closed on Thursday. Although highly unlikely, any move by the Fed would cause a big problem for traders to unwind positions in Japan, with only Friday to trade.
Expect some pretty volatile days this week.
