Here we are, after 7 trading days of making new all time high of 1687.18, we are @ 1630.74, a drop of 56.44 points or down 3.35%......
Many technicians are not worried @ all & seems to be underplaying what happened in last 7 trading days or on Friday, for them its business as usual.
I am extremely concerned after last Fed policy statement details & Q&A which followed ......
Bond yield has jumped in a hurry in back to back sessions
Market has been coming down rather quickly & abruptly with Friday being the tell tale.
In my opinion, this IS a major transition of QE / Stimulus111 nearing end......
Many fundamentalist are taking comfort in the reason of economy being on the mend......
But interest rate jump is taking toll in 10 yr & 30 yr...which has been helping Housing in a big way....housing may slow down as a result.......which is not good for economy.
Inflation will spike once higher interest rates takes hold......
Thus far market has benefited from "low interest rate & low inflation"........
I know....most participant are NOT analyzing this change yet......but TAPE IS......
SO market may open higher on Monday...but it is the quality of close which matters now.
Once we have few more days like Friday...then "common wisdom will change"
Bottom line is "market IS changing"
Jobs report on Friday MAY confirm what Fed may be waiting for & bond yield may give its verdict before Fed does..as is the case in any change of direction. Jobs report may exceed 170 K to 180 K expectations.
IBD on Friday is saying "Uptrend under pressure"
Japan has been signalling that US is forcing a change of High US$ based on rising interest rate...money goes where rates are rising.......
Japan is / has been the leading indicator of stock market Euphoria & sharp pullbacks...........
It is NOT business as usual, it is important to understand & be prepared.......
Writing is in Bond Yield...loud & clear !!!!!!
BLOG does NOT give buy or sell.
Saleem
13 comments:
Hey Saleem,
I think the drop in averages is masking a lot of underlying strength. Maybe I'm one of those fools, but I'm not much concerned with the next direction of the markets and especially my portfolio composition. My weekly update has a bit differing view (which is rare for us!).
Stocktrader
Hi Stocktrader,
Thanks for your feedback.
My comment is market based. Certain stocks can make new highs while most stocks takes it on the chin.
This is the first time that TAPE has to deal with a "major shift in Fed policy"
"never fight the fed"
Saleem
So Saleem What bonds are saying ? Fed will rise interest rate perhaps reduce bond purchasing ? will this lead to higher dollar ? thank you
Hi Djovanny,
Fed is all set to reduce or eliminate $85 Billion Mortgage Bond Security purchase every month....this intention of doing so has already moved 10 & 30 yr yield higher...ie interest rate has already moved UP in anticipation.....
Higher interest rate puts pressure on Stock market in short term....
YES higher rates generally moves currency higher until other currency catches up with similar moves by their Central Banks.
It IS a short term issue until Fed makes its first move or Bonds already reflects that move...whichever comes first......then stocks CAN resume its uptrend.....
Market uncertainty affects majority of stocks in the near term.....
Hope it further clarifies.....
Please watch how we close on a daily basis in near term.
Saleem
Hey Saleem,
Bought WLK @ 93.96. I've been looking to add a chemical company and my usual AXLL is no longer on my buy list after last earnings. I looked at WLK a while ago when deciding about AXLL originally and it seems to have better earnings and stock momentum right now.
Stocktrader
Hey Saleem,
Had a 2/3rd cash position left and bought SWC @ 12.29. Palladium is performing well due to auto sales and supply constraints and the weaker PMI suggests the Fed will continue to support the economy.
Stocktrader
Hi Stocktrader,
Good luck with WLK...
I like your pick of SWC..as metals are coming in vogue....
I am extremely worried that jobs report will be "too strong"...which Fed will use to curtail or eliminate MBS.....
Saleem
Hey Saleem,
For now, I think the sequester is still keeping job growth below potential, and today's PMI had a pretty weak employment component. That said, the monthly jobs number seems like a crap shoot and is always revised significantly in subsequent months.
Stocktrader
Hey Saleem,
It really feels like this market could "crack" today. Everyone is confused at the moment...
Stocktrader
Hi Stocktrader,
I saw all this coming last week....
Watch the close...we may have a weak close.
Saleem
Hey Saleem,
Yes, definitely could be rough. I sold my CSOD @ 39.77 just now to try and lighten up on some high beta exposure.
Stocktrader
Hi Stocktrader,
Good move in booking profit of CSOD...
End of summer could be a great re-entry.
Saleem
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