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ya sudah lah: investor menatap the fed’s actions … 141110_070515

May 7, 2015

ULASAN SEDERHANA gw SOAL STRONG DOLLAR POLICY(negara korbannya)

 
Dollar index per 06 Mei 2015 @94
Bisnis.com, JAKARTA— Indeks dolar Amerika Serikat pagi ini, Rabu (25/3/2015) masih tetap bertengger di level 97, meski sudah dua hari terakhir mampu menguat tipis.

Indeks dolar AS seperti dikutip dari Bloomberg, pada perdagangan hari ini dibuka naik 0,09% ke 97,277. Pada Selasa (24/3/2015), indeks naik 0,16% ke 97,193.

Pada pk. 06:53 WIB, indeks ke 97,276.

Posisi indeks dolar AS

Pk.06:53 WIB(25 Maret)  97,276(+0,09%)
Buka(25 Maret) 97,277(+0,09%)
24 Maret  97,193(+0,16%)

 

 

 

 

Sumber: US Dollar Index Spot Rate, 2015

 

 
(Bloomberg) — The Federal Reserve opened the door to an interest-rate increase as soon as June, while also indicating it will go slow once it gets started.

The new signals were contained in a policy statement that ended an era by dropping an assurance that the Fed will be “patient” in raising rates, and in a fresh set of estimates that lowered the median for the federal funds rate the end of 2015 to 0.625 percent compared with 1.125 percent in December.

“Just because we removed the word patient from the statement doesn’t mean we are going to be impatient,” Chair Janet Yellen said in a press conference Wednesday in Washington.

The Federal Open Market Committee said it will be appropriate to tighten “when it has seen further improvement in the labor market and is reasonably confident that inflation will move back to its 2 percent objective over the medium term.”

“An increase in the target range for the federal funds rate remains unlikely at the April” meeting, it said in its statement.

Yellen is preparing for an exit from the most aggressive easing in the Fed’s 100-year history as the job market overcomes the damage wrought by the deepest recession since the 1930s. At the same time, inflation and wage growth that remain too low are giving her reasons for caution.

Stocks rose, erasing earlier losses, after the FOMC announcement. The Standard & Poor’s 500 Index was up 0.9 percent at 2,091.92B as of 2:31 p.m. in New York. Ten-year Treasury notes yielded 1.96 percent, down nine basis points.

Guidance Change

While Fed officials lowered their estimate for the federal funds rate at the end of 2015, they said in their statement that “this change in the forward guidance does not indicate that the Committee has decided on the timing of the initial increase in the target range.”

Dropping the pledge to be “patient” marks a shift away from the explicit guidance on the future path of policy that the Fed has used since late 2008 to keep longer-term borrowing costs low. The Fed will now set policy at each meeting based on the latest economic data, making its actions less predictable.

The Fed repeated that it sees “strong job gains” and that labor-market conditions have “improved further.”

Still, the committee lowered its assessment of the economy, saying growth has “moderated somewhat.” In January, it said the economy was “expanding at a solid pace.” Export growth has weakened and the housing recovery remains slow, according to this month’s statement.

Two Meetings

Yellen has said the promise to be “patient” means the FOMC would probably wait at least two meetings before raising rates. The next FOMC meetings are scheduled for April and June.

The Fed is preparing to tighten even as stagnant growth elsewhere prompts central banks in Europe, China and Japan to ease policy. That has put upward pressure on the dollar, which has jumped more than 4 percent since Fed policy makers last met on Jan. 28, posing a potential headwind to growth as American exports become more expensive.

Fed officials confront conflicting signals from their dual mandates for full employment and price stability as they weigh when to tighten policy for the first time since June 2006.

Job Gains

Surging job gains pushed unemployment down to 5.5 percent in February, the lowest level in almost seven years, suggesting the economy is strong enough to withstand higher borrowing costs.

Payroll gains have averaged more than 200,000 workers for 12 straight months, the longest streak of such increases since March 1995.

“No matter how you cut the cake, you still have an economy running above trend,” said Bricklin Dwyer, an economist at BNP Paribas SA in New York. Absent a threat of deflation, “the economy can handle higher rates.”

Among companies boosting payrolls is Omaha, Nebraska-based Union Pacific Corp. The largest publicly traded railroad in North America plans to hire about 5,700 employees this year amid an improving economy, Chief Financial Officer Rob Knight said this month in an investor conference.

“That’s a big number,” Knight said. “A lot of those are high-paying union jobs, so these are very good jobs in our industry.”

The economy grew at a 2.2 percent annualized rate in the three months ended December after a 5 percent jump in the third quarter that was the biggest in 11 years.

Housing, Production

Even so, recent data on housing, industrial production and consumer spending have been weaker than forecast, prompting some economists to mark down their estimates for growth this quarter.

Inflation and wage growth also haven’t been as strong as many Fed officials would like, suggesting that there’s more slack left in the economy than low unemployment alone suggest.

Prices as measured by the Fed’s preferred gauge rose just 0.2 percent in January from a year earlier, and inflation has languished below the central bank’s 2 percent goal for 33 straight months.

Yellen last month said it would be appropriate to raise rates if the labor market continues to improve and officials are “reasonably confident” that inflation will move back up toward their goal.

Low inflation expectations are depressing 10-year Treasury yields, which hit a 20-month low of 1.64 percent in January. The yield was at 2.05 percent late yesterday.

One reason for declining inflation: the plunge in oil prices. That gives Fed officials reason to believe consumer prices will recover as the impact of cheaper oil dissipates.

Bond investors aren’t buying that argument. Traders are betting prices will rise at a 1.37 percent annual rate over the next five years, down from a 1.67 percent estimate on March 3, according to break-even rates on Treasury Inflation Protected Securities.

Wages present more of a puzzle. Average hourly earnings rose 2 percent in February from a year earlier, matching the average since the end of the recession in June 2009.

Eighty nine-percent of 49 economists surveyed by Bloomberg this month forecast that the Fed would drop “patient” from its statement. Sixty-nine percent predicted the phrase would be replaced by some other form of guidance.

In December, the FOMC dropped a clause from its statement that it would hold rates low for a “considerable time” and instead said it would be “patient” in weighing an increase.

 

CNN: Repeat after me: The Federal Reserve is going to raise interest rates later this year.

There. That wasn’t so hard, was it?

But many investors are whining about how Fed chair Janet Yellen is about to finally turn out the lights on this great bull market we’ve been enjoying for the past six years.

Get over it.

Related: The bull market turns 6. Now what?

Strong dollar helps Main Street. Yes, higher rates could mean an even stronger dollar. And that’s one thing that’s worrying Wall Street lately because it could hurt corporate profits.

But for average consumers, the mighty greenback is a good thing. It makes it cheaper to travel and also lowers the price of imported goods.

“If you look at the U.S. economy, there are very few signs of weakness. Nothing out there suggests that the strong dollar is actually hurting the economy,” said Sam Wardwell, investment strategist at Pioneer Investments.

Related: The dollar is crushing other currencies

Instead of panicking about how higher rates are going to kill the bull, shouldn’t Wall Street focus instead on the reason why the Fed is probably going to be able to FINALLY raise interest rates from the near-zero levels they’ve been stuck at since December 2008?

Healthy economy: All this fuss is because we have a healthier economy, especially the labor market. A higher number of jobs were added last month than expected while the unemployment rate dipped to its lowest level since before the financial crisis. That sparked a huge sell-off on Friday.

That is myopic. A stronger job market should lead to higher levels of consumer spending … which is still the driving force of the U.S. economy.

This is why Wardwell thinks consumer discretionary stocks — such as retailers, autos and housing suppliers — should do well over the next year.

Sure, wages continue to lag. They rose just 2% over the past 12 months. But there are signs that salaries could soon climb.

Related: 3% raises could be back this year

Wages uptick soon: Another government jobs report, known as the Job Openings and Labor Turnover Survey or JOLTS for short, just showed that there were slightly more job openings in January 2015 than people hired.

And more people voluntarily quit their jobs as well. In other words, people looking for work are finding it, and they’re starting to have more negotiating power to work where they want and for higher salaries.

“Companies cannot fill their open positions and will have to pay more to attract workers,” wrote analysts at research firm Pavilion.

Higher wages should make the Fed feel more confident that rate hikes won’t derail the economic recovery. And if people start to make more money, that should also push up the prices of things to a more normal level of inflation.

Remember that the Fed is supposed to try and promote the highest level of employment it can while also keeping prices stable. Mild inflation is far more preferable than deflation. Just ask anyone in Europe or Japan.

Related: What happened during prior Fed rate hikes?
It’s easier to get a job
It’s easier to get a job

(Don’t fear) the rate hike reaper. The market also seems to be forgetting two other important things about the coming rate hikes. For one, it seems highly unlikely that Yellen is going to repeat some of the mistakes made by some of her predecessors and raise rates too sharply.

Does it really matter if the first increase comes in June or September? No. The first move will probably be small. Probably a quarter of a point. A half a point at most.

Interest rates could be around 1% to 1.25% by the end of 2015. That’s not something any sane person should consider to be cripplingly high.

And given how transparent the Fed has become under Yellen and her former boss Ben Bernanke, is it even possible for the Fed to surprise the market anymore? Every rate increase will probably be painfully telegraphed.

Related: Janet Yellen says too many Americans are still struggling

Finally, there are probably going to be millions of Americans doing their version of the old Mypos Dance of Joy from “Perfect Strangers” once the Fed finally starts to raise rates.

That’s because responsible savers have been penalized for putting money in the bank. The average rate on a savings account is a measly 0.44% according to Bankrate. That can only improve once the Fed raises its federal funds rate.

So Wall Street may have to get used to higher rates. Let’s face it. There was never going to be a perfect time for the Fed to start tightening.

The market has become a liquidity junkie. It’s addicted to the Fed’s easy money policies. It’s time for them to end.

“One of the main criticisms of the Fed is that its programs did not help Main Street,” Wardwell said. “We might get the other side of the pendulum this year. This could be a good year for Main Street even though we might finally get a market correction.”

 

us news & report: Better-than-expected employment figures issued in recent days by the Labor Department have preceded some slippery days for the stock market, as investors are flinching at the prospect of a thriving American economy and what it could lead to in the near future.

The market shed more than 332 points Tuesday following the release of largely positive job-opening figures for the month of January. The dive effectively erased all gains the market had made so far in 2015 as the Nasdaq, Dow Jones industrial average and Standard & Poor’s 500 index all dipped by more than 1.5 percent.

The idea that January’s 5 million job openings – making it the best month for position availability in 14 years – actually hurt the stock market is seemingly counterintuitive.

A high number of job openings suggests people have flexibility in the labor market, a concept further supported by the nearly 3 million “quits” – or people who left their job – in the month of January.

A high number of quits in a given month generally means people in the workforce are confident about their prospects of landing another job. So aren’t these numbers a good thing for the domestic economy?

[READ: 5 Things to Know About the Economy This Week]

The short answer: Yes, but that’s exactly what’s spooking investors, because an improving economy also portends the first Federal Reserve interest rate hike since 2006.

“In prior Fed tightening cycles, what you see is that in and around Fed rate hikes, the first one at least you get market volatility and usually a down stock market,” says John Canally, a vice president and economist at LPL Financial. “The uncertainties around the Fed are when, how much and how fast. And that is certainly reason for markets to hiccup, but they’re probably being premature.”

The Fed has held interest rates to near-zero levels since the Great Recession, effectively making loans less daunting prospects. But many economists speculate that an interest rate hike is inevitable in the near future, as the job market is doing well, the dollar is strong and home sale values have ticked up.

“The Fed draws down interest rates to spark growth in the economy,” says Lindsey Piegza, chief economist at Sterne Agee. “An increase in rates raises the cost of capital. What we would expect to see [once rates increase] is that businesses pull back in terms of taking on risky capital to grow and start new businesses.”

[ALSO: Tech Training Could Help Close U.S. Skills Gap]

An interest rate hike would also take a toll on people hoping to finance a home purchase, Piegza says, because it would lead to more expensive mortgage scenarios. Though rental housing prices continue to climb, more expensive loans make purchasing a home less attractive, dragging down sales and new home construction.

“So if you begin to increase interest rates, what are you going to do to those potential homebuyers who are sitting on the fence? You’re probably going to squeeze a lot of them out of the market,” Piegza says.

But it’s not necessarily an option to leave the training wheels of extremely low interest rates on indefinitely. Maximizing employment, stabilizing prices and moderating long-term interest rates are among the Fed’s key responsibilities. It does these things largely through manipulating interest rates and overseeing the amount of currency in circulation.

Interest rates left low indefinitely can create the threat of inflation and essentially tie one of the Fed’s arms behind its back, inhibiting it from reducing rates to stimulate economic activity.

[ALSO: Tech Training Could Help Close U.S. Skills Gap]

“God forbid something happens in the world and the Fed needs some policy tools to try to aggressively stimulate economic growth here or abroad,” says Phil Orlando, chief equity strategist at Federated Investors. “With the funds rate at zero, they’ve got no bullets to employ. So what they want to do is reload the gun, if you will, and get back to some neutral level of the funds rate over the next couple years.”

Canally says investors can’t stand “uncertainty,” but stock market volatility is likely to continue until quarterly earnings reports come out in April. During the current in-between period when companies aren’t filing earnings reports with the Securities and Exchange Commission, he says, “big macro factors” like the employment reports create fluctuations in the stock market.

“You have internal arguments until [the market] can take direction from what actually matters for stocks, which is earnings. And we’re not going to get that for another month,” Canally says. “And each day that goes by, you’re going to get a little bit more volatility as the end of the business cycle approaches and as the Fed rate hikes approach.”

Canally also points out that stocks grew during the 12-month window immediately following eight of the last nine Fed interest rate hikes. Though he notes that growth generally slows when rates go up, it doesn’t disappear entirely.

“I don’t see there being a significantly negative economic or financial market impact from this,” Orlando says of a potential rate hike. “But the market is conditioned to believe that once the Fed starts hiking rates, the market and the economy are going to roll over and die.”

[SURVEY: Small and Mid-Sized Businesses Optimistic for 2015]

What’s important to keep in mind is that an interest rate hike is likely still a few months off. Some say the earliest reasonable target date for a rate hike could fall in June, while others speculate the announcement will come closer to the end of this year or even sometime in 2016.

Orlando says the announcement likely will coincide with a meeting and press conference. Federal Reserve Chair Janet Yellen and the Federal Open Market Committee don’t speak with the press after each one of their meetings, so Orlando speculates that an announcement is likely to come out of their June meeting or the session scheduled for September.

Before then, the Federal Open Market Committee will meet on March 17 and 18 to discuss the state of the domestic economy, and could drop the “patient” rhetoric it has used to describe its approach to normalizing interest rates.

“When the Fed meets next week for the FOMC meeting on the 17th and 18th, the thinking is they are going to remove the word ‘patient’ from their statement,” Orlando says. “That’s the litmus test. If they remove the word ‘patient,’ that puts a June hike in play.”

But Piegza isn’t so sure the interest rate boost will come in June, largely because wage growth has been so flat. And, although she notes that February’s employment and jobs reports exceeded expectations, they were not expected to do well to begin with, because of the extreme winter weather that struck the country.

“The expectation for February was so low that we really had nowhere to go but beat that expectation,” Piegza says, noting that the unemployment rate dipped to 5.5 percent in part because the labor force contracted by 178,000 people. “The participation rate continued to decline, so the fallout in the unemployment rate was as much a reflection of discouraged Americans as it was unemployed Americans finding gainful employment. And then of course you have that minimal wage growth.”

Yellen has cited stagnant wage growth and stubbornly low inflation as key impediments to a potential interest rate increase. Ideally, a rate hike would coincide with a noticeable uptick in wages so that consumers’ budgets aren’t stretched too thin.

“That’s really what they’re looking for, but as millions of Americans remain dropped out of the labor force and businesses continue to rely on flexible, low-cost labor, we haven’t adequately absorbed enough slack in the labor market to translate into wage pressures,” Piegza says, speculating that an increase might not be seen until late this year or sometime in 2016. “I really don’t see the Fed being able to justify a rate increase.

“And certainly Yellen doesn’t want to go down in the history books as raising rates and then, six months later, having to cut rates again.”

First QE2 buying fails to lift Treasury prices
November 13, 2010

Prices of US Treasuries fell on Friday as the first day of heavy purchasing by the Federal Reserve failed to jump-start wider demand for low-yielding government debt.

The Fed bought $US7.23 billion in Treasury paper on Friday with maturities of between four and six years under its $US600 billion bond-buying program announced last week to stimulate the economy. Prices hit session lows after the Fed completed its purchases, with both seven-year notes and 10-year notes trading a full point lower in price.

“Bears are still in charge,” said Lou Brien, market strategist at DRW Trading in Chicago. “They were waiting for the purchase results and saw no surprises. Then they started selling again.”

Suvrat Prakash, US interest-rate strategist at BNP Paribas in New York, said traders had been waiting until the Fed buying details came out to execute trades they had already planned for the day.

“A couple of people were holding off on shorting the market until the Fed buyback data came out,” he said. “It’s just a bit of unwinding of long positions. Whenever there’s a bit of bearish momentum and people get flushed out of their positions, you can see it go further when the technicals look weak and a lot of technical analysts are saying that now.”

The 10-year note yield is poised for its biggest one-week jump this year, while the 30-year yield could see the largest increase over such a period since June 2009.

The Fed’s purchasing plan was meant to push Treasury yields lower but after two months of frenzied speculation on the size and scope of the plan before it was announced the details left investors disappointed and yields began rising instead.

“Volatility is really keeping people to the sidelines,” said David Ader, head of government bond strategy at CRT Capital Group in Stamford, Connecticut.

“The price action has become so choppy, so erratic. You can’t base it on anything you’re seeing.”

Volume was high, but some trading desks were understaffed following Thursday’s Veterans Day holiday. Analysts also struggled to find a rhythm for the day after conflicting reports over whether the European Union would bail out Ireland as it struggles to control spiraling fiscal troubles.

“I’m actually kind of surprised the short to intermediate end (of the yield curve) is having the reaction that it is today,” said Mary Ann Hurley, vice president of fixed income trading at D.A. Davidson & Co. in Seattle.

“We have the Treasury debt buyback and we still have the problems in Europe simmering,” Hurley said. “With the holiday yesterday and supply out of the way, the economic data today really second tier, I think a lot of people made it a long weekend.”

The latest set of European troubles did not provide the flight-to-quality bid that had often materialized during the flare-up of sovereign debt instability earlier this year.

Ader said many Treasury investors, whose bets that more Fed buying would push yields lower and prices higher had soured during an aggressive, week-long sell-off, weren’t sure what to do ahead of the Fed’s first round of purchases and so were waiting and watching.

“I think probably the best thing to do is to buy with the Fed and sell with the Treasury,” said John Spinello, Treasury bond strategist at Jefferies & Co in New York.

Spinello identified a range for the benchmark 10-year Treasury note yield of between 2.75 and 2.57 percent.

“I think the yield curve will probably flatten; it got way too steep,” he said. “Not necessarily a bull flattener but a bear flattener or maybe a little bit of both. Right now the front end is as weak as it’s been for a long time.”

Two-year notes were yielding 0.47 percent after losing 3/32 in price, having ended on Wednesday at 0.42 percent.

Ten-year notes were down 17/32 in price and yielding 2.69 percent against 2.63 Wednesday. Seven-year notes were off 21/32 in price and yielding 1.91 percent.

Reuters

November 13, 2010
A Calmer Market? Not for Long Bonds
By PAUL J. LIM

AN implicit goal of the Federal Reserve’s plan to buy $600 billion in Treasury debt is to stabilize the market. But this unconventional plan may mean even greater uncertainty for at least one group of investors: those who own long-term government bonds.

“There could be near-equity-like volatility” coming for these bonds, warned Joseph H. Davis, chief economist and head of the investment strategy group at the Vanguard Group.

While the Fed has made it clear that it aims to keep intermediate interest rates very low by buying Treasuries maturing in the 5-to-10-year range, it has said little of its intentions for 30-year debt. As a result, investors who think that the Fed’s plan — called quantitative easing, or QE2 — could lead to higher inflation have managed to drive up long-term yields by selling 30-year Treasuries. Bond yields move in the opposite direction of prices.

Since late August, when the bond market first began to anticipate QE2, yields on 30-year Treasuries have climbed to 4.28 percent from 3.53 percent, leading to significant losses for investors who’ve been betting on long-term bonds. The Vanguard Long-Term Treasury fund, for example, has lost around 8 percent of its value in just the last two and a half months.

Of course, investors in long-term Treasuries have grown accustomed to stock-like swings in their holdings. In the first six months of 2009, the average long-term government bond fund lost 23 percent of its value, only to climb around 14 percent in the subsequent four months, slump 8 percent in the next six months, and soar 26 percent between April and August of this year.

The bond market’s reaction to QE2 is somewhat reminiscent of its response to the Fed’s announcement of its first round of quantitative easing, in March 2009, during one of the rougher periods of the global credit crisis, said Thomas D. Carney, a portfolio manager for the Weitz Funds in Omaha.

In that time, Mr. Carney said, “the Fed accomplished its intended goal of calming the financial markets.” But contrary to what some people believed could happen to Treasuries, he said, volatility grew. Yields jumped after investors grew more confident that economic recovery was near.

Indeed, within a year of that announcement, yields on 30-year Treasuries shot up to 4.75 percent from 3.6 percent. That helps explain why the average long-term government bond fund sank nearly 19 percent last year.

This time around, fixed-income investors could be at even greater risk of suffering losses, because they don’t enjoy that much of a “yield cushion,” said Mr. Davis at Vanguard.

What does he mean by that? Several factors determine how sensitive a bond may be to swings in interest rates. First, there’s duration, a statistical measure expressed in years, that tells how much a bond’s price would fall if interest rates climbed by one percentage point. If a bond’s duration is four years, for example, that implies that the price of the investment could fall 4 percent if interest rates rose by a full percentage point. But if that same bond yielded, say, 5 percent, investors could still avoid losses on a total return basis even if rates rose by a point.

Three years ago, a typical total bond market index fund was yielding around 5 percent with an average duration of about four and a half years. Today, that same fund has a similar four-and-a-half year duration, yet is yielding only around 3.4 percent. That means investors could wind up losing more if rates spike.

OF course, investors could be facing wide swings in Treasury prices whether rates go up or down.

For example, if the Fed succeeds in bolstering investor confidence and economic activity, long-term investors are likely to continue to sell 30-year Treasuries, leading to even greater losses on long-term bonds.

And if the economy heats up to the point where many investors fear the potential for inflation, something else could happen: Yields on 10-year Treasury notes and other intermediate-term securities could also start rising as investors move into more growth-oriented asset classes and as the Fed begins to curtail its bond purchases.

If, on the other hand, QE2 doesn’t spur as much economic growth as the Fed hopes, long-term bond investors might stop fixating on inflation and start to worry about another economic downturn — as they did earlier this year when the European debt crisis struck. Back then, interest rates reversed course quickly, sinking as investors sought the perceived safety of long-term Treasuries. Those lower rates meant higher prices.

The Fed’s powers are limited, said Carl P. Kaufman, co-manager of the Osterweis Strategic Income fund.

“In the long run,” Mr. Kaufman said, “economic results — not the Fed — will determine where long-term rates are going to be headed.”

Paul J. Lim is a senior editor at Money magazine. E-mail: fund@nytimes.com.

Something Big is Coming to Markets

By: Robert McHugh | Sunday, March 15, 2015

We are about to see a series of cycle turns occur simultaneously over the next 30 trading days, a period which includes a Fibonacci Cluster turn window with 10 observations. Within this 30 trading day period are a number of very unusual astrological events, which can affect markets. In the past, we have pointed out that major trend turns often come around the spring equinox, which this year arrives within the important Fibonacci Cluster we discuss below, on March 20th, 2015. Within this cluster turn period we also have a rare Total Solar eclipse (also on March 20th, 2015), the first day of the Hebrew calendar, (Nissan 1, evening also on March 20th), and a New Moon on March 20th. March 20th is also a quadruple witching hour on Wall Street, an options and futures expiration date. Also within this Fibonacci cluster turn period, on April 1st, 2015 is a phi mate turn date, and on April 4th we see a Bradley model turn date, which is also Passover, and also has a Full Moon — not just any Full Moon, but a Blood Moon, the third of four in the 2014-2015 tetrad, a very rare event, that has the additional extremely rare occurrence that all four of these Blood Moons fall on the Hebrew Holy days of Passover and the Feast of Tabernacles (see Genesis 1:14). Something big is about to change.

In our weekend report to subscribers at www.technicalindicatorindex.com, we show that contemporaneous with these events, the stock market has now formed two Megaphone topping patterns that look complete, a Jaws of Death topping pattern that is over two decades old, that started back in 1988 and is reaching conclusion now, and also a Jaws of Death pattern from mid-2014 that is also completing now. See the charts for these patterns below:

Dow Jnes Monthly Chart

Dow Jones Daily Chart

The significance of this confluence cannot be overstated. A huge directional change in markets is fast approaching. We believe there could be a stock market crash later this year, perhaps in the September – October time period, after the approaching major trend turn begins. The Federal Reserve is about to lift short-term interest rates during a period of time when except for Manhattan and the surrounding areas that enjoyed a $5.0 trillion influx of cash from the Fed’s various Quantitative Easing programs, most of the U.S. economy is not prospering. This is a formula for a recession or worse.

The higher value of the Dollar has placed increased pressure on U.S. exports which will eventually show up in a retardation in the growth of corporate earnings. Real Estate remains at a standstill. Newly created family supporting jobs are not sufficient to handle demand as evidenced by the failure of the involuntary part-time employment figures to decline along with the reported increase in non-farm payroll jobs in the latest bogus employment figures, which included an estimate, a guess, a hope from the Bureau of Labor Statistics that half the jobs created came from new businesses they think started up in February. Anybody who knows anything about jobs in new businesses knows that most of the time the cash compensation is below market — if new employees are being paid in cash at all. These new jobs that supposedly were created in February from new businesses are not counted by the BLS. They are a guesstimate. The point is, fundamental economic growth is not what we are being led to believe is the case. Our economy remains weak, so an increase in interest rates would be a repeat of what the Fed did back at the start of the Great Depression in the 1930s.

There are systemic issues of risk that are a serious threat to our economy, the out of control amount of derivatives to mention one, the out of control federal debt, for another, the unfunded federal liabilities for entitlements a third, and the risk of another Wall Street meltdown contagion should a major bank go down the tubes.

Back to the technicals, we saw another stock market Hindenburg Omen observation on Friday, March 13th. If we get a second observation over the next 30 days, that will generate the third independent Hindenburg Omen that contemporaneously remains on the clock over the same next 30 trading days as mentioned at the start of this article. We also got an H.O. in December that remains on the clock through April, and also got an official H.O. in January that remains on the clock through May 2015. This is a highly unusual event, a series of Hindenburg potential stock market crash signals within a few months. An H.O means there is a 20 percent chance for a stock market crash, which is substantially above random, and we must also mention that there has only been one decline greater than 15 percent over the past 30 years that was not preceded by a Hindenburg Omen. H.O.’s mean the stock market is a seriously unhealthy condition.

I will wrap up this article with details of the coming Fibonacci Cluster turn window we have identified. There is a major trend turn coming to stock markets sometime over the next one to four weeks, and the below chart analysis suggests sometime between March 18th and April 22nd. While it is unusual for us to present a Fibonacci cycle turn window with such a wide range of date possibilities, in this case 25 trading days (normally we point out turns with a 5 to 7 day possibility range), this time is different. Normally we see 4 to 6 past tops or bottoms a Fibonacci number of trading days from a future turn period, however this time we have spotted ten. That is not all, these ten are consecutive Fibonacci turn numbers starting at 34 trading days and running through 2,584. That is incredibly unusual.

Fibonacci Clusters

While not a certainty, as there are no guarantees, if I was to venture an educated opinion, I believe it is probable that the stock market will top during the above Fibonacci cluster turn window, and continue to decline for years. I also believe that this autumn 2015 will see a stock market crash within this imminent multi-year stock market decline. It is possible this turn is so important that it started early, on March 2nd.

We have found that when there is a cluster of trading days within a short period of time that are a Fibonacci number of trading days from a key top or bottom turn from the past, there is a higher than normal probability that a significant trend turn is coming around that cluster time period.

What are Fibonacci numbers? They are an incredible set of numbers that seem to rule markets, both in terms of distance of price moves and timing, and rule physics and art throughout the universe.

The Fibonacci number sequence starts with the number one, and then when it adds it to itself, it produces the next Fib number, which would be 2 (1+1), then if we take that resultant number and add it to the previous Fib number in the sequence, it produces the next Fib number, which would be 3 (2+1), then the next number is 3 + the previous number in this sequence which was 2 resulting in 5 (3 + 2), then 8 (5 + 3), then 13 (8 + 5), then 21 ( 13 + 8), etc…, which gets us the sequence 34, 55, 89, 144, 233, 377, 610, 987, 1597, 2584, etc….

What is incredibly unique about this sequence is the two component numbers, when divided by their combined result, will approximate at the low end, and otherwise equal either .382 or .618. The ratio .618 is known as phi. For example, for the Fibonacci number 21, its two components are 13 and 8. If we divide 13 into 21, 13/21 = .618 and 8/21 = .382. The larger the numbers, the more precise they come to .382 and .618. 233/377 = .618 and 144/377 = .382.

So, getting back to our Fibonacci Cluster for mid-March through mid-April:

  • * April 6th, 2015 is a Fibonacci 2,584 Trading Days from the December 28th, 2004 Top.
  • March 27th, 2015 is a Fibo 1,597 Trading Days from the November 20th, 2008 Major Low.
  • April 22nd, 2015, is a Fibonacci 987 Trading Days from the May 19th, 2011 Top.
  • April 9th, 2015 is a Fibonacci 610 Trading Days from the November 1st, 2012 Top.
  • April 10th, 2015 is a Fibonacci 377 Trading Days from the October 8th, 2013 Major Low.
  • April 16th, 2015 is a Fibonacci 233 Trading Days from the May 13th, 2014 Minor High.
  • April 17th, 2015 is a Fibonacci 144 Trading Days from the September 19th, 2014 Top.
  • April 16th, 2015 is a Fibonacci 89 Trading Days from the December 5th, 2014 High.
  • March 18th, 2015 is a Fibonacci 55 Trading Days from the December 26th, 2014 Top.
  • March 20th, 2015 is a Fibonacci 34 Trading Days from the January 30th, 2015 Low.

Our conclusion: Something big is about to affect markets.

The world’s biggest hedge fund is scared that a U.S. interest rate hike later this year will send markets into a 1937-style tailspin, but experts told CNBC that they aren’t too concerned.

In a note to clients that was widely-discussed on Tuesday, Ray Dalio, founder of the $165 billion hedge fund Bridgewater Associates, raised concerns that a Federal Reserve rate hike in June or September could create a market rout similar to the one seen in 1937.

Bridgewater highlighted several similarities between current financial market conditions and 1937: The economy is rebounding, interest rates are at zero and asset prices are enjoying a strong rally. In 1937, the U.S. central bank tightened monetary policy under the belief that the downturn arising from the 1929 Great Depression was over, but its actions tipped the country back into a recession and saw the Dow Jones Industrial Average lost half its value in a year.

“I don’t think we’re in for a replay of 1937,” Jeffrey Franklin, professor of capital formation and growth at the Harvard Kennedy School, told CNBC on Wednesday. “The situation was pretty different. When the government prematurely re-enacted fiscal and monetary tightening back then, unemployment rates were still sky high.”

However, the current strength of the U.S. labor market has been a defining feature of the economic recovery. Data for February showed unemployment falling to its lowest level since 2008, while the creation of 295,000 jobs was the strongest in three months.

Rate increases may not have been the sole reason behind the 1937 stock market crash, Marc Faber, editor and publisher of The Gloom, Boom & Doom Report, told CNBC, so investors must keep that in mind when making comparisons.

Dalio’s assertions and the debate it sparked come ahead of the Federal Open Market Committee’s policy decision later on Wednesday, where the majority of traders expect the central bank to remove the word ‘patient’ from its policy statement.

Read MoreExpect a more hawkish Yellen this time: Analysts

Slow and steady

Officials are aware of the risks behind raising rates too fast and will likely start with a tiny increase, which should mitigate market damage, said John Carey, executive vice president and portfolio manager of Pioneer Investments.

“The general view is that they might start with a quarter of a percent and see what happens. The upper end of their interest rate target may be around 2 percent within the next couple of years assuming the economy continues growing,” he added, noting that markets have already priced this possibility into stocks.

A rate hike will be conducted like “a surgical procedure,” economists at Mizuho Bank said in a note on Wednesday, adding that the Fed will ensure that the initial hike won’t be confused for an aggressive hiking cycle.

Several investment experts don’t expect any major market declines when a rate hike does eventually occur.

“Our internal view at Cumberland Advisors is that the first rate hike will not trigger a market selloff,” said David Kotok, chief investment officer at Cumberland in a note on its website last month.

“Further, we do not expect the bond market to sell off and interest rates to go shooting up when the Fed raises the interest rate from zero by an eighth or a quarter percent.”

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