FOMC Statement Kills S&P Rally, No QE3; EUR/USD Gets Merk'd

The Fed didn't announce QE3 today (which was expected I think), so traders sold the news. Maybe next time. The S&P is still holding the downtrend from July, and the US Dollar Index (DX) broke through the October and November highs today. DX is currently trading at 80.31. EUR/USD got Merk'd today before the S&P sold off (WSJ: Merkel Rejects Raising Lending Limit For ESM-Govt Lawmaker). ESM = European Stability Mechanism: "In July 2013, the ESM will assume the tasks currently fulfilled by the European Financial Stability Facility (EFSF) and the European Financial Stabilisation Mechanism (EFSM)." (

Tom DeMark thinks the S&P hits 1330-1345 by Dec 21. What will DeMark the market to 1,330? A payroll tax cut extension? NYT: House Passes Extension of Cut to Payroll Taxes. Democrats are against it though. This is interesting: Japan Continues To Support Europe At EFSF Auction (NASDAQ). The S&P closed at 1,225 today and is barely holding on to its 50 day moving average. Below are intraday charts of SPY and EUR/USD.

Img: (SPY - S&P ETF)

Img: (EUR/USD)

If interested, here is the FOMC statement (Federal Open Market Committee).

"Release Date: December 13, 2011

For immediate release

Information received since the Federal Open Market Committee met in November suggests that the economy has been expanding moderately, notwithstanding some apparent slowing in global growth. While indicators point to some improvement in overall labor market conditions, the unemployment rate remains elevated. Household spending has continued to advance, but business fixed investment appears to be increasing less rapidly and the housing sector remains depressed. Inflation has moderated since earlier in the year, and longer-term inflation expectations have remained stable.

Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. The Committee continues to expect a moderate pace of economic growth over coming quarters and consequently anticipates that the unemployment rate will decline only gradually toward levels that the Committee judges to be consistent with its dual mandate. Strains in global financial markets continue to pose significant downside risks to the economic outlook. The Committee also anticipates that inflation will settle, over coming quarters, at levels at or below those consistent with the Committee’s dual mandate. However, the Committee will continue to pay close attention to the evolution of inflation and inflation expectations.

To support a stronger economic recovery and to help ensure that inflation, over time, is at levels consistent with the dual mandate, the Committee decided today to continue its program to extend the average maturity of its holdings of securities as announced in September. The Committee is maintaining its existing policies of reinvesting principal payments from its holdings of agency debt and agency mortgage-backed securities in agency mortgage-backed securities and of rolling over maturing Treasury securities at auction. The Committee will regularly review the size and composition of its securities holdings and is prepared to adjust those holdings as appropriate.

The Committee also decided to keep the target range for the federal funds rate at 0 to 1/4 percent and currently anticipates that economic conditions--including low rates of resource utilization and a subdued outlook for inflation over the medium run--are likely to warrant exceptionally low levels for the federal funds rate at least through mid-2013.

The Committee will continue to assess the economic outlook in light of incoming information and is prepared to employ its tools to promote a stronger economic recovery in a context of price stability.

Voting for the FOMC monetary policy action were: Ben S. Bernanke, Chairman; William C. Dudley, Vice Chairman; Elizabeth A. Duke; Richard W. Fisher; Narayana Kocherlakota; Charles I. Plosser; Sarah Bloom Raskin; Daniel K. Tarullo; and Janet L. Yellen. Voting against the action was Charles L. Evans, who supported additional policy accommodation at this time."

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