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| Today's Commentary (Short Term Outlook) |
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Fed shows up Stocks pushed higher again yesterday as the "wall of worry" continues to be climbed. The Dow tacked on yet another 84-points, but the activity after hours stole the headlines. About 15 minutes after the closing bell yesterday, the Fed announced that they are raising the discount rate from 0.50% to 0.75%. You can read more on that here. I'm more interested in the impact of this action on stocks and bonds, rather than the fundemental aspects because we know the stock market does not always move in the direction that fundamentals might dictate. So while the C-fund was up 0.67%, the S-fund picked up 0.60%, and the I-fund gained 0.20%, after hours all those gains were erased. Bonds were down 0.18% yesterday, and have fallen further in the overnight trading. Here's a look at an intraday chart of the U.S. dollar. I've indicated where the stock market closed, and what happened after the Fed announcement of raising the discount rate.  Here the daily chart, which ends at 4 PM ET, and what the after hours trading may have done. It looks like we will be getting another breakout out of a bull flag.  Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk The S&P 500 gave us a great move off of the lows and it is actually looking less and less like a bear flag because of the steepening of the angle of incline, but a selloff today (which may be premature to say) might either take the S&P down to the lower end of the flag portion of the bear flag, or we could see a breakdown of the bear flag, but that would be quite a move (below 1080).  Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk I hate to sound all "conspiracy theory" but the strength in the market over the last few days seemed, I don't know, manipulated maybe? The bear flag was so obvious and I have to admit maybe too many people were talking about it, and the market loves to make the most people wrong at turning points. The move higher out of the bear flag was the unexpected move. Now what? Did the last three days get the bears to give up and buy? Have the big boys been shorting all the way up? Will today be the day that the complacent pay the price? Hey! Maybe I'll make Fridays - Conspiracy Theory Day? OK... maybe not. This also happens to be an expiration Friday, which causes its own market quirks. For that reason, I don't want to go into too much speculation. So many things could happen. For one thing, we get the CPI report on Friday morning, which can be a market mover. Let's just agree that, at the moment, the futures are indicating a very weak opening for this morning. The S&P 500 futures are down about 12.00 as I write this. The Dow futures are off almost 90-points, and the Nasdaq futures show a loss of 15.00. Asian markets are also down sharply. At the end of the day, we might see a big sell-off, or we could see early weakness turn around by the close, we just don't know. We know the last several Mondays have been consistently positive (8 of the last 9 actually) and perhaps this will have an impact on investors and traders late today as they try to capitalize on that pattern? Of course, once you recognize a strong pattern, it usually means it's about to end. OK, I'm speculating too much. Thanks for reading. Have a great weekend! Tom Crowley |