Well, the Fed is concerned about their credibility. And the way we define in economics parlance is credibility is determined by how closely policy matches the rhetoric. If the two don't match, then the value of the rhetoric goes to zero. So the Fed has to walk a tight line between what they say and what they do. Yes, they do watch the market to get a response effect to see how the market is responding to changes but they really discount that a lot because policy choices are meant to be long term and volatility is day by day minute by minute. You can imagine how stupid it would be for the Fed to make a policy decision with a 5 year long term effect based on the dow being down today and then ripping the next 3 months. There really is just too much noise in the market to get a meaningful effect.
The ACD Method
- Thread starter sbrowne126
- Start date
Well, the Fed is concerned about their credibility. And the way we define in economics parlance is credibility is determined by how closely policy matches the rhetoric. If the two don't match, then the value of the rhetoric goes to zero. So the Fed has to walk a tight line between what they say and what they do. Yes, they do watch the market to get a response effect to see how the market is responding to changes but they really discount that a lot because policy choices are meant to be long term and volatility is day by day minute by minute. You can imagine how stupid it would be for the Fed to make a policy decision with a 5 year long term effect based on the dow being down today and then ripping the next 3 months. There really is just too much noise in the market to get a meaningful effect.
We may not be that far off because my ES NL did get down to -2 before heading the other way. However, I also use a modified 30 day NL which I really like to follow that does a volume adjustment. I really don't want to go into details about that but it's just a way of assigning importance to certain data. That number line stayed deeply negative even when the normal number line got all the way back to -2. So all we are doing here is taking data we already have and re-classifying that data into sub categories. The idea is to peel away information we don't want and extract the information we do want. In other words, filter out noise.
yep noting the feds prime directive regarding 2% inflation, they are up against 2 very powerful deflationary forces in a slower growing China and vastly cheaper oil, then there are the negative rates in Europe, overall the US economy still looks pretty good considering. I think last time Dalio was on he was saying they shouldn't raise at all based on negative European rates.
Thanks for the insight...makes sense. You could remove scoring for those days around the holidays that the markets trade but close early or have very below normal volume like most of the days the previous 2 weeks.
Thanks for the heads up King!
Spoos bounced off the QTR A down and are temporarily back above the monthly A down.
USD/JPY also trying to hold the monthly A down. Watch this little fella for your clues...
vix is in backwardation as well.