Daily Market Update – March 19, 2015 (9:00 AM)
That was quite a gift that the FOMC gave to markets yesterday and it was also nice having Janet Yellen add to that gift.
The real gift, however, was the way in which markets reacted, because there really wasn’t very much contained in the FOMC Statement that should have given traders reason to believe that there was increased clarity.
In fact, it’s sort of amazing how the market reacted.
And not just the stock market which turned around over 300 points. But the precious metals, currencies and bond markets all rallied in a big way.
What was fascinating was that almost everyone had been arguing over whether the word “patience” would come out or not from the FOMC Statement. That word was thought to be the difference between getting an interest rate hike in June versus September.
While the word was removed, all that was said with regard to timing was that the rate hike would likely not come at the next FOMC meeting in April.
April? No one was expecting that, so what clarity was then added to justify the kind of response seen?
Hard to say, but it’s also hard to look a proverbial gift horse in the mouth.
The reality is and continues to be that the economy isn’t really showing much in the way of evidence to suggest that inflation is heating up. If you believe the FOMC as they continue to say that they are “data driven,” you have to believe that they don’t have the data to create the belief that the brakes have to be put on the economy as it was heating up too much.
No matter. It was nice seeing that turnaround, but I think it adds to the confusion that’s been seen in the market. Not only is it alternating once again between strong up and down days like it did in January, but there is a stealth bear market going on even as the S&P is less than 1% from its all time high.
That stealth bear market is seen in the large number of stocks that are actually below their 200 day moving averages and the increasing number where the 50 day moving average is approaching or dipping below the 200 day moving average.
In a bullish kind of market the pictures should be reversed.
That’s why you really don’t see or hear of too many people running around bragging about their performance.
Today the feel of the DJIA may be a little different as many are talking about how its volatility will increase now that APple has joined the index, as it is priced more than 3 times what AT&T had been. Since the index is price weighted and not market capitalization weighted, price matters. What’s been over-looked in that analysis is that a post-split Visa begins trading today and that has gone from about $268 to $68, so whatever volatility Apple may bring the split in Visa should be a tempering factor.
With 2 days now left in the week and no new trades, the likelihood is that any new positions opened will look at next week for their expirations. I would still prefer to get some uncovered positions to start generating some income and would be very happy with some assignments. Yesterday’s rally helped, but today doesn’t look as if tere will be any piling on.
Since the pre-futures trading is only moderately lower, anything can really happen once the bell rings. That’s certainly been the case for the past month, as the early trading has provided very little guidance with turnarounds happening for no reasons at all.
We’ll see whether any reason comes forward today and whether yesterday’s bulls come to the realization that their celebration may have been unwarranted.