Although the FOMC did exactly what Fed Funds futures and the majority of economists had expected (i.e. nothing) and the stock market indices did move up after Janet Yellen said the majority of the committee wants to raise rates by the end of the year, the fact that nobody really knows what to expect from Yellen's bunch put uncertainty back on the table yesterday afternoon.

The takeaways from the Fed announcements and Janet Yellen's press conference have been widely discussed. The keys are as follows:

• 13 of the 17 FOMC members believe it is appropriate to start the process of policy normalization this year
• The "glide path" to returning Fed Funds to a more "normal" level (3% - 3.5%) was lowered across the board. The median target range of Fed Funds was reduced by 0.25% in 2015, 2016, and 2017.
• The committee doesn't expect inflation to hit its target until 2018. Note that this is a year later than the projections made in June.
• The effects from lower oil and a stronger dollar may be bigger than previously thought.
• Blame it on China. Yellen & Co. acknowledged that the goings on in China played a large role in the decision not to raise rates this month.
• Tighter financial conditions and developments internationally were also cited as reasons that rates were left alone yesterday.
• The bottom line: Yellen's bunch was more "dovish" than had been expected.

Since we live in a global world these days, the Fed's decision to leave rates unchanged is apparently putting pressure on the ECB to expand its QE program. In short, this is all about the currency war that looks to be developing. The WSJ highlighted that the Fed's decision to leave rates on hold increases pressure on the ECB to expand stimulus due to the headwinds created from a stronger euro. The article noted that with China slowing and Fed likely to maintain go-slow approach to rate tightening, the Eurozone's desired scenario of a weaker euro and an export-driven boost appears unlikely.

In addition, one of the bigger takeaways from yesterday's non-announcement is the realization that central bankers have not exactly had the impact on the global economy they desire. The WSJ points out that while central bankers have injected approximately $8 Trillion into the global economy since the financial crisis and interest rates have fallen about 4% in advanced countries, global growth has been well short of expectations. As such, the argument that central bankers are running out of bullets and concerns about the future may become a topic of discussion.

Probably the biggest issue is the fact that uncertainty was not removed from the market yesterday. While some argue that the continued improvement in labor markets and the recent stabilization in the financial markets suggest that the initial liftoff in rates could come at the end of October, the view on the other side of the field is that the Fed won't act at all this year.

S&P 500 - Daily

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Yellen herself didn't do much to clear up the issue saying, "So as I've said before, every meeting is a live meeting where the committee can make a decision to move to change our target for the federal funds rate. That certainly includes October."

In addition, Yellen was murky on what traders should be focusing on. "To be clear, our decision will not hinge on any particular data release. Or on day-to-day movements in financial markets. Instead, the decision will depend on a wide range of economic and financial indicators. And our assessment of their cumulative implications for actual and expected progress towards our objectives."

What Now?

So, with the non-announcement now out of the way, traders are likely to return their attention to the state of the global economy - with particular attention being paid to Europe and China. And it is the former that appears to be putting traders in a sour mood this morning.

European markets are tanking in the early going with Germany, France, Italy and Spain all down more than 2%. Not surprisingly, this has pushed U.S. futures deep in the red and Wall Street is expected to open down hard.

The Pre-Game Indicators

Here are the Pre-Market indicators we review each morning before the opening bell...

Major Foreign Markets:
Japan: -1.97%
Hong Kong: +0.30%
Shanghai: +0.39%
London: -1.41%
Germany: -2.80%
France: -2.47%
Italy: -2.13%
Spain: -2.19%

Crude Oil Futures: -$0.47 to $46.68

Gold: -$2.00 at $1117.00

Dollar: lower against the yen and euro, higher vs. pound

10-Year Bond Yield: Currently trading at 2.167%

Stock Indices in U.S. (relative to fair value):
S&P 500: -24.90
Dow Jones Industrial Average: -206
NASDAQ Composite: -51.40

Thought For The Day:

"Greater than the tread of mighty armies is an idea whose time has come." -Victor Hugo

Current Market Drivers

We strive to identify the driving forces behind the market action on a daily basis. The thinking is that if we can both identify and understand why stocks are doing what they are doing on a short-term basis; we are not likely to be surprised/blind-sided by a big move. Listed below are what we believe to be the driving forces of the current market (Listed in order of importance).

1. The State of Global Central Bank Policy
2. The State of China's Economy
3. The State of the U.S. Economy

The State of the Trend

We believe it is important to analyze the market using multiple time-frames. We define short-term as 3 days to 3 weeks, intermediate-term as 3 weeks to 6 months, and long-term as 6 months or more. Below are our current ratings of the three primary trends:

Short-Term Trend: Moderately Positive
(Chart below is S&P 500 daily over past 1 month)

Intermediate-Term Trend: Negative
(Chart below is S&P 500 daily over past 6 months)

Long-Term Trend: Neutral
(Chart below is S&P 500 daily over past 2 years)

Key Technical Areas:

Traders as well as computerized algorithms are generally keenly aware of the important technical levels on the charts from a short-term basis. Below are the levels we deem important to watch today:

• Key Near-Term Support Zone(s) for S&P 500: 1925
• Key Near-Term Resistance Zone(s): 1990-2000

The State of the Tape

Momentum indicators are designed to tell us about the technical health of a trend - I.E. if there is any "oomph" behind the move. Below are a handful of our favorite indicators relating to the market's "mo"...

• Trend and Breadth Confirmation Indicator (Short-Term): Neutral
• Price Thrust Indicator: Negative
• Volume Thrust Indicator(NASDAQ): Neutral
• Breadth Thrust Indicator (NASDAQ): Neutral
• Intermediate-Term Bull/Bear Volume Relationship: Negative
• Technical Health of 100+ Industry Groups: Moderately Negative

The Early Warning Indicators

Markets travel in cycles. Thus we must constantly be on the lookout for changes in the direction of the trend. Looking at market sentiment and the overbought/sold conditions can provide "early warning signs" that a trend change may be near.

• S&P 500 Overbought/Oversold Conditions:
  - Short-Term: Overbought
  - Intermediate-Term: Oversold
  
• Market Sentiment: Our primary sentiment model is Positive .

The State of the Market Environment

One of the keys to long-term success in the stock market is stay in tune with the market's "big picture" environment in terms of risk versus reward.

• Weekly Market Environment Model Reading: Moderately Negative

Wishing you green screens and all the best for a great day,

David D. Moenning
Founder and Chief Investment Strategist
Heritage Capital Research

Indicator Explanations

Trend and Breadth Confirmation Indicator (Short-Term) Explained: History shows the most reliable market moves tend to occur when the breadth indices are in gear with the major market averages. When the breadth measures diverge, investors should take note that a trend reversal may be at hand. This indicator incorporates an All-Cap Dollar Weighted Equity Series and A/D Line. From 1998, when the A/D line is above its 5-day smoothing and the All-Cap Equal Weighted Equity Series is above its 25-day smoothing, the equity index has gained at a rate of +32.5% per year. When one of the indicators is above its smoothing, the equity index has gained at a rate of +13.3% per year. And when both are below, the equity index has lost +23.6% per year.

Price Thrust Indicator Explained: This indicator measures the 3-day rate of change of the Value Line Composite relative to the standard deviation of the 30-day average. When the Value Line's 3-day rate of change have moved above 0.5 standard deviation of the 30-day average ROC, a "thrust" occurs and since 2000, the Value Line Composite has gained ground at a rate of +20.6% per year. When the indicator is below 0.5 standard deviation of the 30-day, the Value Line has lost ground at a rate of -10.0% per year. And when neutral, the Value Line has gained at a rate of +5.9% per year.

Volume Thrust Indicator Explained: This indicator uses NASDAQ volume data to indicate bullish and bearish conditions for the NASDAQ Composite Index. The indicator plots the ratio of the 10-day total of NASDAQ daily advancing volume (i.e., the total volume traded in stocks which rose in price each day) to the 10-day total of daily declining volume (volume traded in stocks which fell each day). This ratio indicates when advancing stocks are attracting the majority of the volume (readings above 1.0) and when declining stocks are seeing the heaviest trading (readings below 1.0). This indicator thus supports the case that a rising market supported by heavier volume in the advancing issues tends to be the most bullish condition, while a declining market with downside volume dominating confirms bearish conditions. When in a positive mode, the NASDAQ Composite has gained at a rate of +38.3% per year, When neutral, the NASDAQ has gained at a rate of +13.3% per year. And when negative, the NASDAQ has lost at a rate of -8.5% per year.

Breadth Thrust Indicator Explained: This indicator uses the number of NASDAQ-listed stocks advancing and declining to indicate bullish or bearish breadth conditions for the NASDAQ Composite. The indicator plots the ratio of the 10-day total of the number of stocks rising on the NASDAQ each day to the 10-day total of the number of stocks declining each day. Using 10-day totals smooths the random daily fluctuations and gives indications on an intermediate-term basis. As expected, the NASDAQ Composite performs much better when the 10-day A/D ratio is high (strong breadth) and worse when the indicator is in its lower mode (weak breadth). The most bullish conditions for the NASDAQ when the 10-day A/D indicator is not only high, but has recently posted an extreme high reading and thus indicated a thrust of upside momentum. Bearish conditions are confirmed when the indicator is low and has recently signaled a downside breadth thrust. In positive mode, the NASDAQ has gained at a rate of +22.1% per year since 1981. In a neutral mode, the NASDAQ has gained at a rate of +14.5% per year. And when in a negative mode, the NASDAQ has lost at a rate of -6.4% per year.

Bull/Bear Volume Relationship Explained: This indicator plots both "supply" and "demand" volume lines. When the Demand Volume line is above the Supply Volume line, the indicator is bullish. From 1981, the stock market has gained at an average annual rate of +11.7% per year when in a bullish mode. When the Demand Volume line is below the Supply Volume line, the indicator is bearish. When the indicator has been bearish, the market has lost ground at a rate of -6.1% per year.

Technical Health of 100 Industry Groups Explained: Designed to provide a reading on the technical health of the overall market, this indicator takes the technical temperature of more than 100 industry sectors each week. Looking back to early 1980, when the model is rated as "positive," the S&P has averaged returns in excess of 23% per year. When the model carries a "neutral" reading, the S&P has returned over 11% per year. But when the model is rated "negative," stocks fall by more than -13% a year on average.

Weekly State of the Market Model Reading Explained:Different market environments require different investing strategies. To help us identify the current environment, we look to our longer-term State of the Market Model. This model is designed to tell us when risk factors are high, low, or uncertain. In short, this longer-term oriented, weekly model tells us whether the odds favor the bulls, bears, or neither team.

Disclosures

The opinions and forecasts expressed herein are those of Mr. David Moenning and may not actually come to pass. Mr. Moenning's opinions and viewpoints regarding the future of the markets should not be construed as recommendations. The analysis and information in this report is for informational purposes only. No part of the material presented in this report is intended as an investment recommendation or investment advice. Neither the information nor any opinion expressed nor any Portfolio constitutes a solicitation to purchase or sell securities or any investment program.

Any investment decisions must in all cases be made by the reader or by his or her investment adviser. Do NOT ever purchase any security without doing sufficient research. There is no guarantee that the investment objectives outlined will actually come to pass. All opinions expressed herein are subject to change without notice. Neither the editor, employees, nor any of their affiliates shall have any liability for any loss sustained by anyone who has relied on the information provided.

The analysis provided is based on both technical and fundamental research and is provided "as is" without warranty of any kind, either expressed or implied. Although the information contained is derived from sources which are believed to be reliable, they cannot be guaranteed.

David D. Moenning, an advisor representative of CONCERT Wealth Management Inc. (CONCERT), is founder of Heritage Capital Advisors LLC, a legal business entity doing business as Heritage Capital Research (Heritage). Advisory services are offered through CONCERT Wealth Management, Inc., a registered investment advisor. For a complete description of investment risks, fees and services review the CONCERT firm brochure (ADV Part 2) which is available from your Investment Representative or by contacting Heritage or CONCERT.

Mr. Moenning is also the owner of Heritage Capital Management (HCM) a state-registered investment adviser. HCM also serves as a sub-advisor to other investment advisory firms. Neither HCM, Heritage, or CONCERT is registered as a broker-dealer.

Employees and affiliates of Heritage and HCM may at times have positions in the securities referred to and may make purchases or sales of these securities while publications are in circulation. Editors will indicate whether they or Heritage/HCM has a position in stocks or other securities mentioned in any publication. The disclosures will be accurate as of the time of publication and may change thereafter without notice.

Investments in equities carry an inherent element of risk including the potential for significant loss of principal. Past performance is not an indication of future results.