Hello MarketClub members everywhere. Stocks are trading sharply lower today after comments from a Federal Reserve banker suggests that a September rate hike might not be entirely off the table after all.
In a speech today Federal Reserve Bank of Boston President Eric Rosengren said that "a reasonable case can be made" for a rate hike, according to The Wall Street Journal.
Those words shook Wall Street, as traders had pretty much written off an interest rate increase at the Fed's Sept. 20-21 meeting. This feeling was based on the weaker-than-expected August jobs report released last week. Although Rosengren did not specifically mention September, his words, to some degree, leaves the door open to a rate hike, which Wall Street is not positioned for according to analysts.
Key levels to watch next week:
S&P 500 (CME:SP500): 2,193.42
Dow (INDEX:DJI): 18,631.60
NASDAQ (NASDAQ:COMP): 5,287.61
Gold (FOREX:XAUUSDO): 1,330.87
Crude Oil (NYMEX:CL.U16.E): 44.55
U.S. Dollar (NYBOT:DX.U16.E): 96.21
Every Success,
Jeremy Lutz
INO.com and MarketClub.com
Where's Adam? Watching Jeremy struggle to write numbers for key levels was making me snicker.
I don't understand why the "trannies" (DOW Transports) broke out to the upside before the steep sell-off...makes no sense! The Transports are a good indicator. Now, I am very conflicted. Can't trust the trannies? The financials, the small caps, the semis, and even the HYG/JNK were all off to the races until yesterday as well. I was so ticked-off last week when the Bears appeared to have come up short it persuaded me to believe the DOW was on its way to 20,000. Wow, I'm so relieved that I didn't commit any cash into equities this past week. Was waiting to see if the S&P was going to break 2,193 and it never came close. Well...now you can pretty much etch these in stone: DOW 18,631, S&P 2,193, and Nasdaq 5,287...those highs will likely stick for a while.
What happened yesterday came out of nowhere, but should've happened immediately after Jackson Hole. That's what I was looking for back at the end of August. Why didn't the Fed talk more hawkish then? Stupid Fed-heads! It's amazing how a little, tiny 25-basis point rate hike can suddenly derail the stock market. It just goes to show how wussy and fragile this economy really is. It can only survive on steroids, it's addiction to Fed stimulus. The Fed giveth and now the Fed could taketh away! Call it the punch bowl. Call it the gravy train. If they come back with QE4 at some point it will be during a recession/depression and after the damage has been done.
A "HUGE" stock market dive will likely put Trump in the White House too. The incumbent party typically loses when the market tanks just in time for the election. Thanks to the Fed's sudden cat and mouse game DOW 12,500 is back on the table and could happen in just a few weeks. YES...DOW 12,500 in just a few weeks!!! Prepare yourselves! Get out of equities on any dead cat bounce next week. The most hated stock market rally of all-time could very likely fall on its face. I'm back to being a Bear.
With all our attention focussed on Going to the Races, we fell accidentally into a Bermuda Triangle. Let us hope for all of us that are still long that the damage won't be too severe.