The week that was…
After a stifling tight range for many weeks – and more of that the first 4 days of the week, we finally saw a break in the action Friday. It occurred to the downside. Quite a few technical markers were broken; more on that later. It was all about the Federal Reserve again as someone dared to promote the idea that a rate hike could occur!
Comments from Boston Fed President Eric Rosengren—a voter this year on the Fed’s interest-rate setting board—helped to contribute toe the selloff. He said that the U.S. central bank could resume gradual rate increases as the risks facing the economy are more in balance, reigniting Wall Street’s fears about the end of easy-money policies.
To show how inane the market is about trying to read the tea leaves of a whopping 25 basis point rate hike, just the talk of a speech Monday by a normally dovish Fed member (Lael Brainard) helped stoke the fire of Friday’s selloff.
Thursday the European Central Bank sat pat, rather than do even more stimulus – which ruffled some feather of the “easy money, now and forever” crowd.
Ironically economic data the past week was pretty mediocre which the bulls were liking as it means no rush for the Federal Reserve to move. “Bad news is good news”:
The Institute for Supply Management said its nonmanufacturing index fell to 51.4 last month from 55.5 in July—the slowest pace of growth since 2010.
Then the hammer dropped Friday.
Here is a nice 5 day “intraday” chart of the S&P 500 via Doug Short.
Yikes: Did I mention the robots are coming?
The week ahead…
Can the market recover from the horror that is a POTENTIAL 25 basis point hike in December? Can the rumors of a September rate hike chase out the last remaining bull!? Oh the drama!
Monthly retail sales will be the major economic report on deck. Expect almost all talk to be about the Fed and it’s Sep 20-21 meeting though.
Short term: We were waiting to see which way this 2 month wedge in the S&P 500 resolved – up or down. Down it is. Not only that but May 2015 highs were breached….slightly. The 50 day moving average was sliced through easily.
With the NASDAQ both the summer and winter 2015 highs were broken; the index came to rest at its 50 day moving average.
A similar situation in the Russell 2000 with the selloff ending Friday on the 50 day moving average.
What a cruel mistress the NYSE McClellan Oscillator was. After staying negative for weeks upon weeks, it peeked its head back to positive this week before the crushing blow Friday. That’s a head fake of epic proportion but to be fair after 6 weeks of negative readings one shouldn’t get giddy the first day we go positive.
Long term: Bulls remain in total control. But obviously would like to get the S&P 500 back over that 2135 line.
Charts of interest:
Ten year yields rallied sharply Friday…
The volatility index came out of its slumber. One could point to this chart as a symbol of complacency in the market but this has been the case for many weeks so the low readings certainly didn’t help in any market timing.
More fun in brick & mortar as Pier 1 (PIR) forecast a wider quarterly loss and said its chief executive is leaving at the end of the year. Forgetting the action this week — just look at that ugly action since spring – talk about a 1 stock bear market!
Nintendo (NTDOY) surged more than 26% after Apple said it would add the company’s popular Super Mario Run game to its app store and put Pokémon Go on the Apple Watch.
Hedge fund honcho Bill Ackman took a stage in Chipotle (CMG).
Not much excitement around the launch of the new iPhone, at least in terms of Apple’s (AAPL) stock.
Have a great week and see you next Sunday.