The Fed admitted today they are clueless, and their credibility is shrinking every month. First they added new criteria to their policy, the unemployment rate, then they changed the goalposts on the number they're looking for, now they've come out and said the economic outlook is "uncertain". Bear in mind how far off these people were with their forecasts before they became "uncertain". They are totally winging it.

I see one of the members even suggested NIRP by next year.

I saw the headline relating to that comment from one of the members.  Poor retirees, they will continue to depleete their retirement savings.  Brutal.

Jester,

Yes, I know that the Fed grabbing another 'mandate' out of the blue that they'll consider in terms of  China and worldwide economic prospects makes those thing new items on their criteria for raising rates. And I had a feeling that the market would head south today. And I understand that the effects of fed policy of continuing to fill the punch bowl raises concerns about the strength of the dollar and the effect of that on trade, deflation, overseas profits, etc. (Might be a good time to buy some gold, if one thinks that the Fed policy here equates to it wanting a weaker dollar, and as one source said, the Fed gets what it wants.)  

But is that all what this selloff is all about? And does the fact that all these issues with China slowing along with world trade (including emerging markets relying on selling commodities that are denominated in dollars), were already well known and clear as day make any difference?  I can see the argument for why it doesn't (above), but it does almost seem like if the Fed acknowledges it, it suddenly becomes 'real', as if it wasn't before they weighed in on it. Pinnochio economics?

It's all subject to interpretation of course. My opinion is that the Fed has become less transparent, which means volatility and risk. I also think part of it is that they are losing credibility. When you want someone to have your back, you want them to have credibility. Note that the China market collapsed despite threats of arrests, Govt buying of stocks, daily propaganda, etc., because central banks can mask risk but they cannot eliminate it.

Rate hike when S&P hits 2400, QE4 when S&P hits 1700. There's your data dependency :-)

I am still not confident that the actions or lack thereof of the Fed really matter today.  On the one hand, I know that reversing years of zero rates to increasing rates is psychologically tough for markets to digest given that the dollar will innevitably rise further against the currencies of weak economies.  On the other hand, I also know that the Fed will do rate increases very gradually until inflation forces their hand which should have a gradual effect on the economy, I also am in the camp that believes that there is currently a rate ceiling due to the current low economic growth and persistently low inflation (again, due to very poor growth rates around the globe), this ceiling is likely to cap rates (Fed rate not treasuries) at somewhere in the neighborhood of 2.5 to 3% in the mid term (3 to 5 years).  Given this, I believe this is just the normal adjustment period, but one that would pass quickly, only caveat would be if China has a true economic crash, then all bets are off.

That said, IMO markets are still biased on the downside, rallies are on very poor volume and drops are not met with buying.  From where I stand, the Fed inaction is not what is driving the market now, it is more of a macro problem and the markets are simply just looking for further drops.  Prices just need to be more attractive before buyers come in force.

lt cap,

There was a pretty funny story on NPR yesterday, quoting from the 'Banker's Almanac' - kind of like the Farmer's Almanac, but different - weather conditions - such as cumulous clouds heading south over Washington, D.C. means that the Fed will hike rates soon. Other weather conditions contraindicate that. Red clouds with a glaring sunset means we're at war, etc. Probably as accurate if not more so on wtf the fed will do, and when, if anything but continue to burble nonsense.

That's funny.  An alternate method is to use Astrology, which is in fact used by some nut job traders as a method to divine market direction, LOL