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What to Focus On After the Fed Statement

NEW YORK ( TheStreet) -- The Federal Open Market Committee looks poised to approve additional monetary stimulus when the Federal Reserve releases its statement at 12:30 p.m. EDT Thursday.

The expert consensus calls for the FOMC to extend its zero-to-0.25% federal funds rate into mid-to-late 2015. With regard to a third round of quantitative easing, or QE3, they are predicting it will go forward with aggressiveness ranging from just $400 billion spread over nine months to an open-ended commitment (no amount or end date), beginning with $50 billion this month. The purchases will be long-dated U.S. Treasuries and mortgage-backed securities.

As my readers know, I am against what the Federal Reserve has done and think that Ben Bernanke needs to be replaced.

Following the Fed statement, I recommend focusing on Comex gold and Nymex crude oil. I covered gold on Monday in Gold Stocks Continue to Lag Gold and crude oil on Tuesday in Energy Stocks Outperforming Crude Oil. In the currency markets, focus on the euro vs. the dollar, where a technical breakout is close above my semiannual pivot at 1.2917, which was tested this morning.

Among the major equity averages, my focus is the Dow Jones Transportation Average, which has been a lagging, but playing catch-up this week. If the stock market reacts positively to the Fed statement, Transports should continue to recover, as they are the most economically sensitive.

Transports ended last week with a negative weekly chart profile, while all other major averages were solidly positive. If Transports ends this week above its five-week modified moving average at 5094, the weekly chart profile shifts to positive.

Dow Transports are important for the long-term bulls because the Dow Jones Industrial Average had a new 2012 closing high at 13,333.35 on Wednesday. In tracking Dow theory, the Dow Transports needs to have a closing high above its March 19 high at 5360.04 to confirm a Dow Theory Buy Signal.

Source: Thomson/Reuters

Analysis of the Dow Jones Transportation Average (5174) -- The daily chart for Transports is positive with rising momentum and is above its 21-day, 50-day and 200-day simple moving averages at 5097, 5096 and 5128. My weekly value level is 4989 with my monthly risky level at 5279.
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