The Fed-Induced Market Cycle Continues

lance_HSThe markets had a lot to digest yesterday. The Dow fell over 300 points. The S&P 500 broke below 1,900 for the first time since August. The economy posted minimal gains in consumer spending and personal income. Yields were flying around doing all sorts of crazy things.

And yet, nothing has fundamentally changed.

We’re still stuck in this ongoing state of volatility, much of it thanks to the Fed. Just before these would-be economic gods held their key interest rate at zero a couple weeks ago, volatility went berserk.

But it hasn’t settled down since. U.S. Treasury bond yields are up 3% one day and down the same the next. What gives?

The institution lost credibility when it decided not to hike rates. It might not have done itself any favors in the days to follow when it said we could expect a rate hike by the end of the year. Either way, they’re just blowing smoke. And everyone knows it.

The Fed is waiting for a couple data points to line up before they make their move. So it should be clear that when inflation ticks higher and wages start trending up, they will raise rates.

That is, assuming those things will happen.

According to Fed chair Janet Yellen, we are very close to a rate hike. Meanwhile, the markets have priced in less than a 50% chance the federal funds rate will go up by year end.

There’s a few key pieces of economic data coming out later this week that should propel this drama forward – namely Friday’s jobs report.

But right now, the market’s so confused that whether we get positive or negative economic data, investors seem to overreact. Again, despite positive economic news yesterday morning, the market suffered one of its worst selloffs in a month (which says a lot given the kind of month we’ve had).

So, until it’s clear what the Fed’s next move will be, you can expect this pumped-up volatility to continue.

Remember though, volatility will give Dent Digest Traders opportunities to profit! Making money on wild swings in the Treasury market is what we do.

Just take a look at the chart of the 30-year U.S. Treasury bond below:

Volatility in 30 Year US Treasury Bond September 2015

Look at that volatility! Like I said, up 3% one day, down 3% the next. This is the kind of environment that offers a lot of short-term trading opportunities for us.

Based on these movements, subscribers of Dent Digest Trader were able to cash in a 16% gain recently – not bad considering we held that most recent trade for just a week – and I just sent another trade alert this afternoon that you can take advantage of tomorrow.

For us, the getting’s been good. More trades and gains to come as this Fed-induced market cycle continues. I’d tell Yellen “thanks” if I wasn’t so sick of seeing her face.

Lance Gaitan

Lance Gaitan
Editor, Dent Digest Trader

Why Winners Keep Winning (And Losers Keep Losing)

If “buy-and-hold” and the notion that you can’t beat the market have left you short of your personal and retirement goals, then you’re going to want to hear the truth about passive and active investing.

Chances are if you’re more than 25 years old, you think it’s impossible to “beat the market!” But you CAN beat the market… you just need to use the right strategy! Find out more in our new report from Adam O’Dell,, Why Winners Keep Winning (And Losers Keep Losing)!

LEARN MORE
Categories: Interest Rates

About Author

Lance Gaitan graduated from Franklin University in Columbus, OH with a degree in Finance. After graduating and working as an auditor for an insurance administrator as a number of years, he attained his securities license. He then went to work as a broker for a small firm and during the mid-1990’s Lance managed the futures trading desk for Piper Jaffray, a large regional brokerage firm based in Minneapolis. After migrating to Florida in early 2000, Lance founded a futures trading firm, GSV Futures, specializing in retail commodity trading strategies. Lance sold that business in 2006 and joined Harry Dent, Jr. and Rodney Johnson at Dent Research shortly thereafter.