Major averages closed nearly break even on higher volume and near the peak of their trading ranges. Friday was an options expiration day so higher volume could be expected. While it appears the averages are trying to find direction, stocks themselves are holding up while a few new actionable pocket pivots continue to make it through our rigorous filters.

While central banks around the world continue to print money, and Bank of Japan Governor Haruhiko Kuroda indicated their central bank is ready to cut interest rates deeper into negative territory, the US central bank is within reach of its twin targets of maximum sustainable employment and an inflation rate of 2% according to Federal Reserve Vice Chairman Stanley Fischer. This suggests he is open to further interest rate hikes this year. Further, the core measure of the personal consumption expenditure index - the Fed’s favorite measure of inflation - at 1.6% “is within hailing distance" of the central bank’s 2% target, Fischer added.

Fed Chairwoman Janet Yellen may consequently use her speech entitled “The Federal Reserve’s Monetary Policy Toolkit" in Jackson Hole this Friday at 10 am ET to suggest higher rates as soon as September though the Fed's biggest worry is the global economy. China is still expanding but at the slowest pace in years. Indeed, the two most recent market corrections beyond 10%, one early this year, and the other in August 2015, were largely due to surprisingly downbeat economic reports out of China. This comes as no surprising since all economies are deeply connected, and China's economy which already places in pole position by some measures should continue to do so by most measures within the next several years or less according to a report issued by Goldman Sachs among others.

Nevertheless, both the CPI and jobs report are heavily manipulated, and the Fed knows this, so while the global economy remains stagnant, the Fed's hands remain tied. All they can do is jawbone about higher rates without actually moving them higher in any meaningful way. The futures markets seem to realize this as one must go out to 2017 to see odds above 50% of a rate hike. Nevertheless, strong words from Yellen could take markets down for a few days before they find a floor then repeat the pattern of pushing to new highs as QE-capital continues to find a home in US stocks.

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