The week that was…
It was all about the Federal Reserve as we noted it would be. In last week’s recap we said:
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.
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.
So the market got what it wanted and we predicted. And we saw a big rally Wednesday as is the norm when the Fed gives the market what it wants. Which is almost always the past 2 decades.
The policy-setting Federal Open Market Committee, in a 7-to-3 vote, opted to keep rates steady in what Chairwoman Janet Yellen described as a “new normal” as central banks elsewhere around the globe embark upon quantitative-easing measures.
Everyone sat on their hands Monday and Tuesday waiting for the “all clear” signal from the Fed. Once that was achieved a sturdy rally happened Wednesday and Thursday. Friday gave back about half of that.
On the economic front, news releases were non events.
Here is a 5 day “intraday” chart of the S&P 500 via Doug Short.
Here are the most shorted stocks in the Russell 3000 as expressed by short interest as percent of “float” (i.e. shares that trade publicly).
Students from Universities across the US form teams, register, than compete in a four-week trading competition, running October 10th to November 5th. Each team starts with $500,000 in virtual currency and can trade stocks, options, as well as ETFs using the TD Ameritrade thinkorswim platform.
The team with the highest return at the end of the competition takes the crown alongside a variety of prizes.
The week ahead…
Will Monday’s debate influence the markets Tuesday? The market generally wants certainty and it certainly has a better idea of what Hillary Clinton would be all about so it will be an interesting reaction to watch.
“One thing markets will be watching is whether either of the candidates comes across as, for lack of a better word, scary,” said Brad McMillan, chief investment officer at Commonwealth Financial Network, in emailed comments. “Market reaction will probably depend on how successful each candidate is in demonizing the other’s proposals, and how effective each is in his or her own defense,” McMillan said.
It’s another week where economic news will not be the type that moves markets. Investors will begin to look ahead to earnings season in October.
Short term: The S&P 500 looked like it was in a bear flag formation last week but the Fed came to the rescue. There is still not the same strength in that index as we see in the NASDAQ but a push to new highs to confirm the NASDAQ’s move would be in the bulls favor. The NASDAQ was at all time highs Thursday so no complaints there from bulls.
The Russell 2000 has a nice level to watch for the bulls – 1200. A break below that would bode ill.
Long term: The S&P 500 is back firmly above spring/summer 2015 highs. The NASDAQ looks in good shape.
Charts of interest:
Then 10 year bond had rallied to the 1.70% area DESPITE generally dovish Fed comments – which we found interesting. But Wednesday’s news obviously curtailed the rally in yields.
Cloud company Apptio (APTI) had a big first day move Friday after IPOing at $16, although it did close on its lows. This will be an interesting one to watch next week.
Twitter (TWTR) surged Friday on a report of a buyout. Long time readers may recall we highlighted the stock for (a) being quite strong when the market was in its doldrums and then (b) rallying sharply in the next 2 weeks, even after a disaster quarter which is very unusual. Usually people stay away from a stock like that for at least a quarter. We opined that it “acted” like a stock that might be bought out!
Sarepta Therapeutics (SRPT) surged strongly after the Food and Drug Administration granted its Duchenne muscular dystrophy drug—the first treatment for the degenerative disease—accelerated approval. Congrats to anyone who held this one.
GoPro (GPRO) had broken out of a downtrend last week on sizable volume. This week it rallied another 10% on news of a new camera and its first drone – volume remains immense.
Have a great week and we’ll see you back here next Sunday!