FOMC WEEK!

FUNDAMENTAL ANALYSIS
Its FOMC week again as Uncle Ben and his crew are scheduled to announce their rate decision this coming Wednesday (see economic calendar). What does FOMC mean anyway? FOMC = Federal Open Market Committee. It is the top committee in the Federal reserve board that determines monetary policy in order to control inflation and reduce unemployment. Investors are not looking forward to a rate cut this time round but instead to a rate hike in order to push up the dollar and combat rising oil price. When interest rate goes up, the value of the dollar goes up as money base in the economy reduces, hence reducing the price per barrel of imported oil. That's the relationship between oil price and interest rate. Right now, combating high oil price is indeed the most important thing all over the world. China has raised energy prices and world leaders have met over the weekend to discuss how to combat high oil prices. All these goes to show that high oil price cannot go on forever as it gets too painful to bear. Sadly, human beings are usually driven to action only when the pain is too much.

TECHNICAL ANALYSIS
The Dow lost a whooping 3.78% last week alone and have retreated more than 6% since it peaked in May. The short term trend for the Dow continues to be down with the March lows as immediate support. Could the March lows coincide with a turnaround in oil price, thereby rebounding the stock market? It just might with all the talk and action against oil but so far, there are still no technical indications suggesting a turn around in oil price yet.


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