In last week’s recap we asked: “Has the Fed solved all the market’s problems in 1 speech?” Thus far the market says yes! As Guns n Roses preached – all we need is a little “patience”. Four up days followed by a nominal down day Friday had the market following it’s normal pattern the past […]Continue reading
It was another volatile week with big swings especially Thursday and Friday but the new Federal Reserve Chairman finally bowed to pressure from the investor class and went very DOVISH in comments Friday, stoking the type of rallies we’ve seen for decades now on the back of words by Greenspan, Bernanke, Yellen, et al. Ironically the guy was sitting next to Yellen and Bernanke while making these comments…
“We don’t believe that our issuance is an important part of the story of the market turbulence that began in the fourth quarter of last year. But, I’ll say again, if we reached a different conclusion, we wouldn’t hesitate to make a change,” Powell said. “If we came to the view that the balance sheet normalization plan — or any other aspect of normalization — was part of the problem, we wouldn’t hesitate to make a change.”
Thursday’s swoon was due to guidance by Apple (AAPL) as the company’s words signaled the fear of many market watchers about a global slowdown, especially in China. This led to the worst day for Apple since 2013.Continue reading
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In last week’s recap we wrote:
“All the charts continue to point to bad signs – that said in the near term the market is EXTREMELY oversold and vicious rallies can and do happen within downtrends but aside from the nimblest of traders it remains a time of caution. Maybe Santa can bring some rallying this week.”
“Again let me say we are VERY oversold short term so a violent oversold rally could occur at any time.”
Indeed we saw that with a vicious rally Wednesday – in fact the first 1000 point move in the DJIA in history. Since we prefer % gains, Wednesday’s rally was the best for the major indexes since March 23, 2009. For those with very short time spans and nimble fingers the selloff Monday – on top of what was rarely seen oversold conditions – was a nice short term buying opportunity for a quick in and out trade. That said we are nowhere near out of the woods – the rubber band had simply gone too far one way and when that happens the snap back is often furious. Thursday was another wickedly volatile day with the intraday action (heaving selling until the closing 90 minutes when another giant rally occurred). Stable markets are relatively calm – this is not that.
Speaking of volatility:Continue reading
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Another disaster week for the markets, and one of the worst this writer can remember since the financial crisis. Indeed this was the worst one week performance for the S&P 500 since 2011 and NASDAQ since October 2008! Not even a more “dovish” Fed could save it Wednesday; definitely a change of character. All the charts continue to point to bad signs – that said in the near term the market is EXTREMELY oversold and vicious rallies can and do happen within downtrends but aside from the nimblest of traders it remains a time of caution. Maybe Santa can bring some rallying this week.
The Fed announced its fourth interest-rate increase of the year, hiking the federal funds rate by 25 basis points to a range of 2.25% to 2.5%, and deepened those losses during a press conference where Chairman Powell explained the decision and accompanying forecasts. The central bank now pencils in two rate hikes in 2019, not the three moves seen in September, and it still forecasts just one more hike for 2020.
Of particular concern was Powell’s discussion of the Fed’s quantitative tightening program, which is now removing $50 billion of federal government debt and mortgage bonds from the central bank’s balance sheet. Powell reiterated in his news conference that balance-sheet reduction would remain on “autopilot,” suggesting that even if the U.S. economy deteriorates significantly, as many market participants are predicting will happen next year, financial conditions will nevertheless become tighter month-by-month.
“The immediate market reaction has been that the statement is less dovish than anticipated,” said Steven Blitz, chief U.S. economist at TS Lombard. “Perhaps people had unrealistic expectations about what the Fed would say.”
“I would characterize the Fed’s statement as dovish, but perhaps not as dovish as the market hoped,” said Peter Berezin senior vice president of global investment strategy at BCA research.
Economic news was not market moving so we’ll ignore it.Continue reading