In most cases, when the US Federal Reserve says it is delaying the push to raise interest rates, the S&P rallies. Yesterday, when the Fed said it may have to delay the hikes, U.S. stocks fell. To few people’s surprise the Fed’s rate setting committee decided against a June rate cut and left rate unchanged. What did surprise people was the Fed lowering its outlook for future rate cuts for 2016, 2017, 2018 and possibly beyond. A phrase that Yellen used in her press conference was that the ‘new normal’ has altered rate hike expectations and that the Fed is going to be forced to move slower on interest rate hikes. The Fed expected at least four rate hikes in 2016; two rate hikes in March to two rate hikes in June. If anything is clear it’s that the Fed got ahead of itself, and now that job growth has dropped and economic weakness persists, the Fed is being forced to lower its policy goals. In the past, putting off a rate hike was bullish, but it was not much of a confidence builder yesterday. The index markets were trading higher before the statement, but the longer Yellen spoke, the more selling hit the S&P pushing the major indexes down and extending the current losing streak to its fifth day. Gold rallied, oil fell, and the yield on the U.S. 10-year Treasury note fell to 1.58%, its narrowest point since November of 2007.
With big names like George Soros, Bill Gross and Carl Icahn all calling for a ‘major’ pull back or ‘meltdown’ for the stock market, one has to wonder if and when this will actually take place. When the credit crisis started back in 2007 the PitBull had already warned me that there was ‘rotten wood’ floating around in the banks and brokerage stocks. The market leaders and S&P tumbled, and Bear Stearns and Lehman Brothers went out of business. Meanwhile Merrill Lynch was sold to Bank of America (the stupidest thing I have ever seen). I knew things were going to get bad. Eight years later, and a 250% rally in the S&P, now some big talking heads are saying the end of the rally is near. I do not doubt that, the S&P is due for a correction, but I do not think the global stock markets including the S&P are going to go down hard, nor do I think anything structurally will change anytime soon. The problem with George Soros, Bill Gross and Carl Icahn, like many other talking heads / market timers, is they have already said this many times, and based on recent performance, their calls will end up like all the rest. And you know what? When they are wrong, just like Tom Demark and Robert Prechter, they will not say they were wrong, and people will continue to buy their services.
Over the past few months many people question what I call my ‘gut feeling’ for the markets. That you need more tools than just a gut feeling. I agree 100%, but I also think a little common sense needs to be applied. There will be few times that so many talking heads will be right at the same time. It is just not that easy picking a QE top, and as long as the printing presses are printing money, why jump in front of it. So many great traders have tried to fade the S&P over the last several years, I just think it’s better to step back after the S&P pulls back than it is to get negative after a decline, no matter how big or small it is.
I am always going to look at the charts and I am always going to pay attention to volume. I am always going to ‘listen’ to what the market timers and guys like George Soros have to say, but at the end of the day, I decide which way the markets are going for myself. If I am going to make or lose money it’s not going to be because I jumped on the talking heads bandwagon.
Conclusion: As traders we can’t depend on what other people think. Everyone has different risk tolerance and we do not all see the markets in the same way. As the PitBull says, “If you want to make the money, you have to do that work,” that is never going to change.
$1,300 Gold
After a lot of tug and pull the S&P sold off late in the day when the MiM started to show over $550 mil to sell. The Futures that bounced off 2074.00 for most of the day took one last stab on the upside trading 2075.00. As the MiM continued to show increased selling the ESU16 dropped all the way down to new lows at 2061.00. The actual MOC was 1.1 billion to sell and the ESU16 closed at 2063.25 on the 3:15 futures close. Overnight the ESU16 maintained its weakness as global markets again traded risk off. The S&P pushed back to this week’s lows trading down to 2051.75 late in the Asian session before bouncing back to 2058.00 and is currently trading at 2056.00 at 6:00 am cst on volume of 250K.
In Asia, 10 out of 11 markets closed lower (Shanghai -0.50%), and In Europe 10 out of 12 markets are trading lower this morning (DAX -0.67%). Today’s economic calendar includes the Weekly Bill Settlement, Consumer Price Index, Jobless Claims, Philadelphia Fed Business Outlook Survey, Current Account, Bloomberg Consumer Comfort Index, Housing Market Index, EIA Natural Gas Report, 3-Month Bill Announcement, 6-Month Bill Announcement, 52-Week Bill Announcement, 2-Yr Note Announcement, 5-Yr Note Announcement, 7-Yr Note Announcement, 30-Yr TIPS Announcement, Fed Balance Sheet and Money Supply.
Our View: We have a busy economic calendar today. It’s my guess that the ES moves higher, but I have to admit, the markets are weak. I still think the ESU can get back to the 2090 level just not this week. Our view, you can sell the rallies and buy weakness, or just be patient and buy weakness.
As always, please use protective buy and sell stops when trading futures and options.
- In Asia 10 out of 11 markets closed lower: Shanghai Comp -0.50%, Hang Seng -2.10%, Nikkei -3.05%
- In Europe 10 out of 12 markets are trading lower: CAC -0.41%, DAX -0.65%, FTSE -0.51% at 6:30am ET
- Fair Value: S&P -8.24, NASDAQ -7.37, Dow -95.73
- Total Volume: 1.9m ESU 600k ESM and 10k SPU 8K SPM traded
[s_static_display]
No responses yet