Fed Keeps Rate at Zero Percent, SPY Rides Above January Highs [GLD, SPY, TLT, UUP] 3/16/2010

There were interesting correlations today after the Fed left rates at 0% - 0.25% and said purchases of $1.25 Trillion in agency mortgage-backed securities and $175 Billion in agency debt neared completion. The Fed still sees subdued inflation. I provided a comparison chart of TLT, SPY, GLD and UUP reacting to the statement and broke each out separately ($DXY instead of UUP) with simple technical analysis.   I like watching the reflation crew to judge overall strength of the market and inflation expectations.  SPY broke above the January highs, GLD is flirting with near term ceilings, 20+ Treasuries are making moves around critical support above the downtrend and DXY is testing 50DMA support. See charts for more info and setups.  The rest of the week will make or break the charts.  Overnight futures are up except the Dollar. Watch out for volatility, as always.

 SPY (SPDRs S&P 500 ETF)

TLT, GLD, SPY, UUP, USO Comparison Post Fed Statement

GLD (SPDR Gold Trust)

DXY0 (US Dollar Index)

TLT (iShares 20+ Treasury Bond Fund)

"Federal Reserve Press Release

Release Date: March 16, 2010

For immediate release

Information received since the Federal Open Market Committee met in January suggests that economic activity has continued to strengthen and that the labor market is stabilizing. Household spending is expanding at a moderate rate but remains constrained by high unemployment, modest income growth, lower housing wealth, and tight credit. Business spending on equipment and software has risen significantly. However, investment in nonresidential structures is declining, housing starts have been flat at a depressed level, and employers remain reluctant to add to payrolls. While bank lending continues to contract, financial market conditions remain supportive of economic growth. Although the pace of economic recovery is likely to be moderate for a time, the Committee anticipates a gradual return to higher levels of resource utilization in a context of price stability.

With substantial resource slack continuing to restrain cost pressures and longer-term inflation expectations stable, inflation is likely to be subdued for some time.

The Committee will maintain the target range for the federal funds rate at 0 to 1/4 percent and continues to anticipate that economic conditions, including low rates of resource utilization, subdued inflation trends, and stable inflation expectations, are likely to warrant exceptionally low levels of the federal funds rate for an extended period. To provide support to mortgage lending and housing markets and to improve overall conditions in private credit markets, the Federal Reserve has been purchasing $1.25 trillion of agency mortgage-backed securities and about $175 billion of agency debt; those purchases are nearing completion, and the remaining transactions will be executed by the end of this month. The Committee will continue to monitor the economic outlook and financial developments and will employ its policy tools as necessary to promote economic recovery and price stability.

In light of improved functioning of financial markets, the Federal Reserve has been closing the special liquidity facilities that it created to support markets during the crisis. The only remaining such program, the Term Asset-Backed Securities Loan Facility, is scheduled to close on June 30 for loans backed by new-issue commercial mortgage-backed securities and on March 31 for loans backed by all other types of collateral."

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