If you would like an email sent to you when I update the blog please send an email with "subscribe" in the subject line to traderbob58@gmail.com. To be removed use "unsubscribe".

Search This Blog or Web

Tuesday, July 11, 2017

Daily update 7/11

Treading water.

Three days in a row of very light volume.  The last two days came on neutral breadth.  Yesterday was slightly negative and today was slightly positive.  The market is coiling for a move one way or the other.  New highs dropped down to 79.  New lows were stable at 42.  SPX tested slightly below the 50 SMA, but bounced right back.

I have added a support line to this chart.  The futures have dipped below it several times, but have bounced right back.  Currently they are finding resistance at the 100 SMA.  Which line ends up getting broken?

The red count increased a bit today, but this chart is still neutral.

The market is waiting for a catalyst to go somewhere.  Yellen testifies tomorrow.  They usually release prepared remarks somewhere around 10 AM.  That could be the catalyst.  I happen to catch Art Cashin on CNBC today commenting that he expected Yellen to be dovish tomorrow.  I found that interesting because it seems to me that everybody from the FED lately has been rather hawkish.  I wonder if the market is listening.  What I think I heard is that they want to start the balance sheet reduction in Sept. and do another rate hike in Dec.  That is not dovish.  Did I hear it wrong or are investors living in denial?  Cashin is usually plugged in to what a lot of people think which is why his comments really surprised me.  These are interesting comments from Jamie Dimon.

JPMorgan Chase & Co. Chairman Jamie Dimon said the unwinding of central bank bond-buying programs is an unprecedented challenge that may be more disruptive than people think.

I would classify Dimon as a pretty optimistic guy normally.  Any cautious words from him should be heeded.

Unlike Cashin I expect Yellen to be at least as hawkish as she was at the last meeting.  In Daily update 6/14 Ultra-low Volatility #ThisTimeIsDifferent I wrote 

"Early this morning the dollar went down considerably on a batch of weaker then expected economic data.  After the FED announcement it rallied considerably as Yellen was outright hawkish.  The FED even put out a plan to reduce the balance sheet and they want to start doing it this year.  Isn't that the most hawkish thing they could do today?  Gold and gold stocks reversed sharply.  However, TLT only barely noticed.  The stock market did not seem to care at all."

The recent employment data gives the FED plenty of cover to go ahead with their plans.  I don't know if the market does not believe they will reduce the balance sheet or that it won't make a difference.  It really matters.  If they think the FED is bluffing then the market might react when it realizes they will actually do it.  If they don't think it will matter then the market should not react negatively.  Unless the data degrades significantly between now and Sept. I expect they will start on the balance sheet reduction.


No comments:


The information in this blog is provided for educational purposes only and is not to be construed as investment advice.