The total RSI suggests a technical rebound from mid-next week onward, Mr. Tetsuo Inoue

The much-anticipated FOMC has ended. It decided to keep the policy rate—the target for the Federal Funds rate—at essentially zero (the lower bound). However, the statement signaled a change in forward guidance, and in a press conference after the FOMC, Chairman Powell said about this change that it "clarified a strong commitment to achieving our goals over the long term."

(With this change) the three conditions for lifting the zero lower bound were stated as: (1) the labor market recovers to the level the FOMC considers full employment; (2) the inflation rate reaches 2%; (3) a path is reached where inflation temporarily runs modestly above 2%.

Additionally, with regard to the Fed's purchases of U.S. Treasuries, the policy to continue at the current pace of $80 billion per month was maintained. But in addition to the aim stated when QE was resumed in March—“the markets had been disrupted by the coronavirus, and this function needed to be normalized”—this time they added the reason of supporting the flow of credit to households and businesses by continuing QE, i.e., supporting the economy.

In this FOMC, because the Fed’s quarterly update on monetary policy and the economy included projections through 2023, it drew attention. The end-2023 policy rate, among 17 participants, 13 saw keeping the current stance, implying a prolongation of accommodative policy. In the outlook, since inflation is expected to reach the 2.0% goal by the end of 2023, the news coverage concluded that the consensus is to keep zero interest rates through the end of 2023.

By the way, there was no mention of the Evans Rule—an approach adopted around 2012–2014 that sought explicit criteria for inflation and unemployment. The Fed did not impose a time bound to bring unemployment to 4.0% (the Fed bears responsibility in this area, unlike the Bank of Japan). The current longer-run unemployment projection is 4.1%, and it is expected to reach this level by the end of 2023. In other words, by end-2023 everything will be normalized.

In response to this decision, the U.S. stock market saw the Dow Jones rise more than 300 points at one time, but in the end the Nasdaq’s tech-stock profit-taking persisted, and the Dow itself slowed toward the close. However, while the Dow rose by 36.78 points, the five stocks it has been tracking recently contributed as follows: only Honeywell International contributed +11 points, while the other four contributed a combined -58 points, i.e., a total -47 points from the five stocks. Considering this, the Dow as a whole managed to stay in positive territory.

The RSI totals attached to yesterday’s chart for the Nikkei Average, which appeared to have bottomed early, stood at 110.45% yesterday. The day before, it had fallen 0.44% from the day before. Yesterday, it rose 1.01% from the prior day, confirming that the bottom at 108.47% on 9/10 was indeed the bottom. As for the Dow, as of this morning the index itself is in positive territory as noted above, but the RSI total was 98.96%, down 3.48 percentage points from yesterday, dipping below 100%. If we assume the Dow’s level remains unchanged day to day, the bottom would likely occur in the latter half of next week, around Wednesday to Friday, at about the mid-80s percentile, and very close to the threshold outside the 80% velocity boundary. It’s about time.