The week that was…
After the big selloff a week ago Friday, bulls rushed right back in Monday shooting the S&P 500 up 1.47% as Federal Reserve governor Brainard was dovish; some of Friday’s selloff was due to expectation she’d be hawkish. The probability of a rate increase at the September Fed meeting fell to 15% from a previous reading of 24% post speech After Monday, the Fed entered its “blackout” period ahead of its Sept. 20-21 policy-setting meeting.
Speaking at the Chicago Council on Global Affairs, Brainard said the Fed should be cautious about raising interest rates to avoid getting trapped in a low-growth, low-inflation environment.
However, all those gains was lost Tuesday. Buyers came in again Thursday, which was surrounded by two relatively quiet and slightly negative days. All in all, it is nice to see some volatility return from the snoozer that was late summer. However heightened volatility brings more risk to the bulls. From this perch there has been and continues to be zero expectation for a September rate hike as the Fed doesn’t want to be seen as “political” and trying to move the market ahead of November, but the Fed is at least trying to throw some bones out there to make the market a bit less complacent.
On the economic front, retail sales (-0.1% vs a +0.3% expectation) and industrial production (-0.4% vs -0.3% expectation) came in weaker than expected which is “good” if you love free Federal Reserve money for the rest of your life. If you care about the actual economy – not so good.
“Retail sales number was disappointing, especially given that so many economists were forecasting an improvement in the second half of the year. The economy is growing at an anemic pace,” Wiegand said.
Here is a 5 day “intraday” chart of the S&P 500 via Doug Short.
Did GM just shock Tesla? The 2017 Chevy Bolt now has the same range as the Roadster.
This week a century-old Detroit automaker, General Motors Co., not Tesla, unveiled the latest breakthrough electric car. The 2017 Chevy Bolt and its 238 mile range rivals that of the Roadster and at a third of the price. The Bolt’s $37,500 sticker price isn’t exactly “affordable” for the average American buyer, but in terms of range per dollar spent, GM just bested every other electric vehicle on the market, including the full lineup of Teslas.
The week ahead…
All eyes on the Federal Reserve with a meeting Tue/Wed and a press conference by Yellen Wednesday. Since we expect nothing to happen Wednesday in terms of raising rates maybe the market will be in “relief” mode. Unless there is strong language from Yellen hinting at a December rate hike. At which time everyone will act like raising rates 25 basis points a year means the end of days. Like #BREXIT. Economic data next week is not the type that usually moves markets.
Short term: Some danger in this S&P 500 chart as the entire week was spent below the 50 day moving average and there was really no push to get back above after Monday’s reflex rally. Some hint at a bear flag formation can be seen. As for the NASDAQ it looks quite a bit better although still in a bit of a downtrend – the big week from Apple helped.
The Russell 2000 has a nice level to watch for the bulls – 1200. A break below that would bode ill.
The NYSE McClellan Oscillator was negative all week which is not a positive. If there is some more selling going into the Fed meeting and it gets deeply oversold that could be a nice upside trade for the short term for a “rubber band” snap back but the bigger picture is still one of caution.
Long term: The S&P 500 is flirting with spring/summer 2015 highs. A break below would be bearish in the intermediate term.
Charts of interest:
Then 10 year bond rallied to the 1.70% area DESPITE generally dovish Fed comments – interesting. As you can see, technically speaking it is up against a downtrend line.
Apple (AAPL) had a great week on strong demand for its new iPhones and upbeat analyst comments. This is interesting in light of the tepid reaction to the actual iPhone 7 announcement!
Intersil (ISIL) jumped after Japanese chip maker Renesas Electronics said it planned on buying the U.S. semiconductor maker for $3.2 billion. This had already been a very strong chart!
Aerie Pharma (AERI) soared 45% Thursday after the drug discovery company’s treatment for lowering fluid pressure inside the eyeball yielded promising results. Congrats if you had that lottery ticket!
Alibaba (BABA) continues to be a monster in this market…
GoPro (GPRO) had a very sharp 2 day rally and Friday’s move (on huge volume) pushed it out of a month long downtrend.
Have a great week and we’ll see you back here next Sunday!