Absolutely surreal. The Fed removes policy accomodation language and says that further measured tightening is likely and this gets spun as a positive. Unbelievable.

Here's Haver Analytics on this:

The target interest rate for Federal funds was raised 25 basis points to 4.25% at the latest meeting of the Federal Open Market Committee. The unanimous decision was widely expected by analysts. The discount rate also was raised 25 basis points to 5.25%. This latest increase was the thirteenth since June of 2004.

· Today's press release from the Fed expressed clear concern about pending inflationary pressure. "... possible increases in resource utilization as well as elevated energy prices have the potential to add to inflation pressures."

· As a result of this concern, "further measured policy firming is likely to be needed to keep the risks to the attainment of both sustainable economic growth and price stability roughly in balance."

From 8:30 this morning Bloomberg's guests were pronouncing "the fed will change it's language and it will be seen as the end of rate hikes is moving nearer". I guess, if you repeat something enough times you and those around you will start to believe that it's true. Kind of like Bush and Iraq, "we're making progress..." Bah.

Yeppers. It's important to look past the talking heads - all of them. So, what are the talking heads saying about Bush and Iraq?

BTW, Iraq just had another round of elections. Imagine that - The very first Arab democracy is taking shape right in the middle of the Middle East and we get to watch it happen. Amazing times, really.

The Fed has finally stated that there MAY be another hike in six weeks, instead of saying that there WILL be another rate hike. Why shouldn't Wall St. see this as a little encouraging?

smess-

1) Historic precedent 4 and 8 months after the final fed hike the market is DOWN (I believe Doug Kass has pointed this out). The long term data does not fit with what occurs in a raging bull market which is the period (1982-1999) in the minds of THs.
2) The market is overbought.
3) Sentiment has turned quite bullish, which is bearish.
4) The cash is low at mutual funds and as measured at Rydex and the VIX at low extreme reflecting complacency.
5) While the fed 'may' be near the end the data suggest that the fed will continue to tighten.
6) The Fed has a bright history of continuing to tighten until something breaks. And while that MAY be soon, when the break occurs it is generally bad news for stocks.
7) The Fed is not an all knowing being (god) they are human. As such they are dealing with (subjective) data and take action without fully being able to anticipate the outcome of those actions. Not that anyone else can know either, but the uncertainty is bad for stocks.
8) The market leadership is in energy and metals- what benefits these sectors does not necessarily benefit the rest.
9) Stocks remain overvalued based on long term p:e range... and earnings growth x-energy has peaked.
10) The 4Q rally has been of poor quality.
11) The Q1 which follows, recent history suggest does not favor the bulls.
12) We are in a long cycle featuring valuation contraction... if stock prices were unable to advance while earnings growth was robust, what will they do as earnings decline?
13) The 4 year cycle suggest lows for the market in 2006.

These are just the things that pop into my mind as to why the market should not be so 'encouraged'.

On an 'encouraging' note... it sounds like too many specs are short energy so they could rally into year end. And the gold:miners ratio suggest that for all the talk traders have not fully embraced the bull market in gold, so again they could get positioned into year end.

Bill-
Some important "page 16" news. Energy Information Administration now projects $54 per bbl average oil out to 2025 before inflation. Previous forecast was for a decline to $31.

Let's get on the energy bandwagon.

http://www.eia.doe.gov/oiaf/aeo/index.html

stockman,
My comments were reflecting a look ahead in the range of a few hours to a couple days. MarkM's first comment to this thread also reflected the same time frame as me. I certainly was not making an observation four to eight months out as you noted. In that time frame I have the same opinion of this market as you.

BillC started this thread by saying the Fed announcement "allows Wall Street to interpret it anyway they want". I disagree. I think that they made it clear in their last meeting minute release that they intended to signal the end of the rate increase at some point, as Fed President Fisher noted in his "8th inning" speech last June. The markets were waiting for this moment and the pop in the stock market was the result, which shouldn't have been too surprising.