The Medium-Term Trend - Wednesday, March 15

The Fed remarked today that they will continue to maintain their large Treasury holdings for the time being rather than let them roll off as many investors expected. It is believed that by maintaining these large holdings, the Fed is keeping longer-term rates low.

In other words, the Fed is focusing on promoting growth over fighting inflation.

This news gave the inflation-sensitive and growth-sensitive groups a big boost, and pushed down the rate-sensitive group along with the US Dollar. Junk bonds and small caps rallied.

I think the big rally in some these groups was also due to a short-term oversold general market based on the PMO index. The inflation-sensitive group has been selling off for a couple of weeks, and were probably ready to rally on any news. Just my opinion…

Now we need to wait a couple days and see how the dust settles. Will energy and commodities join the general market in the broader uptrend, or is this just a temporary bounce?

Below is a relative strength chart for KRE which is a group that reacts favorably to a steep yield curve, and it didn’t like what it heard from the Fed.

Below is the relative strength for EEM, and this group really liked what it heard from the Fed.

The Medium-Term Trend

I know the major indexes just keep pushing higher despite the endless warnings and cautions, etc.

The short-term trend just turned higher, but I wonder if we may finally have the short-term rally that is worth selling in order to make some money on a larger, medium-term downside move.

Based on the indicators, and despite today’s strong market, once again… the indicators I follow are making me think that we are getting close to the medium-term peak.

I really like these Martin Pring indicators, and they are peaking together. The Europe stocks may need a little more time to turn down, but the momentum looks to be pointed lower for the others.