Market is gaining on news that Obama and Boehner were close to a major budget deal. We are seeing some volatility now as more news came out indicating that White House Press Secretary Carney was denying the report of a possible budget deal, (Boehner has subsequently agreed with Carney that no deal exists). Expect volatility to continue over the coming days as more news crosses the wires. Market should break the highs from May when resolution on the budget deal is reached and the debt ceiling is raised.
I continue to see choppy markets ahead, but I probably like buying the dips a little better right now in anticipation of a higher debt ceiling. Opposing news will make me a confident seller of any rallies...
Thursday, July 21, 2011
Thursday, July 14, 2011
Up, Down and Repeat... Will There Be a Sustained Move and in Which Direction?
As long as there continues to be uncertainty in regard to the US Debt Ceiling, QE3 and the risk of default on sovereign debt in the PIIGS, the markets will continue to swing up and down with speculation, optimism and fear.
There will likely be uncertainty around these topics throughout the summer. The reason I expressed concern (in the previous post) that the market could see another leg down, is because the commodity complex continues to have the potential to correct further. It would be in the Feds best interest to see this happen because it would support their case that inflation is not a problem and that, in fact, deflation is the concern. Falling commodities and a weakening stock market would be the easy catalyst for the Fed to move ahead with more stimulus. It doesn't mean another move down is inevitable, but it presents the possibility. If so, it will be a buying opportunity. The market will eventually move to new highs, but until we see some sort of confirmation that the debt ceiling will be raised and/or that the Fed will confirm another round of stimulus, the timing of catching the move will be uncertain.
Worth Mentioning
In the FOMC minutes from yesterday, some participants supported that there could be a need to provide additional monetary policy accommodation. Reaction sent the markets ripping higher yesterday morning, but the gains were not held as the choppy action continues.
Precious metals also ripped higher in reaction to the Fed comments. The difference with the metals is that they have been holding their gains. Bernanke and the Fed would prefer this not happen as they will have to find new ways to skate around the fact that inflation is not a concern. Good luck with that. With sovereign debt fears in Europe, inflation fears in China and Brazil and a continuation of loose monetary policy by the Fed and other Central Banks, global interest in the precious metals is only growing. The metals can be a risky and volatile asset to trade, but looking into the future, they are the safest asset to own. I like buying the dips in the metals for as far as I can see.
Current overall market bias: Expect choppy action to continue.
There will likely be uncertainty around these topics throughout the summer. The reason I expressed concern (in the previous post) that the market could see another leg down, is because the commodity complex continues to have the potential to correct further. It would be in the Feds best interest to see this happen because it would support their case that inflation is not a problem and that, in fact, deflation is the concern. Falling commodities and a weakening stock market would be the easy catalyst for the Fed to move ahead with more stimulus. It doesn't mean another move down is inevitable, but it presents the possibility. If so, it will be a buying opportunity. The market will eventually move to new highs, but until we see some sort of confirmation that the debt ceiling will be raised and/or that the Fed will confirm another round of stimulus, the timing of catching the move will be uncertain.
Worth Mentioning
In the FOMC minutes from yesterday, some participants supported that there could be a need to provide additional monetary policy accommodation. Reaction sent the markets ripping higher yesterday morning, but the gains were not held as the choppy action continues.
Precious metals also ripped higher in reaction to the Fed comments. The difference with the metals is that they have been holding their gains. Bernanke and the Fed would prefer this not happen as they will have to find new ways to skate around the fact that inflation is not a concern. Good luck with that. With sovereign debt fears in Europe, inflation fears in China and Brazil and a continuation of loose monetary policy by the Fed and other Central Banks, global interest in the precious metals is only growing. The metals can be a risky and volatile asset to trade, but looking into the future, they are the safest asset to own. I like buying the dips in the metals for as far as I can see.
Current overall market bias: Expect choppy action to continue.
Monday, July 11, 2011
Rough Seas Ahead
The choppy price action that I am expecting for the month of July has begun. This morning the S&P 500 Futures are already trading down 30 points from the Friday morning highs. I exited my swing long position at the close of trading on Friday as I will be expecting opportunities to be both long and short in the coming weeks.
Following the disappointing Employment Report Friday morning, the ES dropped more than 20 points within 5 minutes. That was a pretty extreme move and showed that the market was vulnerable following such a swift run-up. Traders were far too ready to take profits.
I have entered a cautious stance looking forward through the remainder of July. I will be expecting choppy markets as I watch for signs on how the market will trade heading into the fall.
There are several themes that could play out in the coming months. I have some concerns that the market could actually head down to lower lows this year before reversing back upwards. I will describe some of the reasons for this in my next post... For now though, I will be looking to buy dips and sell rallies as the market will likely see a choppy July
Following the disappointing Employment Report Friday morning, the ES dropped more than 20 points within 5 minutes. That was a pretty extreme move and showed that the market was vulnerable following such a swift run-up. Traders were far too ready to take profits.
I have entered a cautious stance looking forward through the remainder of July. I will be expecting choppy markets as I watch for signs on how the market will trade heading into the fall.
There are several themes that could play out in the coming months. I have some concerns that the market could actually head down to lower lows this year before reversing back upwards. I will describe some of the reasons for this in my next post... For now though, I will be looking to buy dips and sell rallies as the market will likely see a choppy July
Tuesday, July 5, 2011
We Got the Big Market Rally, But Will it Continue?
The S&P 500 has rallied over 70 points in the past 5 trading days. My prediction that the market bottomed on June 16th proved to be on the money. My subsequent suggestion that the market was set to rally within the next week took a couple of extra days to play out, but nonetheless has done so. Last week the S&P 500 saw gains every trading day of at least 0.75%. Its only the 8th time in the index's history that this has happened. I remain long the market, but I will be looking to take more profits given the recent run-up.
My overall outlook remains bullish. I continue to expect new highs this year, however, we could see some choppy action over the course of July. I don't expect the market to continue straight up. For that reason, I will consider closing out my swing position soon and adapt a strategy that will take advantage of a range-bound and/or choppy type market action. That being said, I continue to be long the e-mini S&P 500 Futures (ES).
Today I wouldn't be surprised to see limited consolidation action following the big move last week. We are approaching solid resistance overhead and I don't expect the market to ignore it...
My overall outlook remains bullish. I continue to expect new highs this year, however, we could see some choppy action over the course of July. I don't expect the market to continue straight up. For that reason, I will consider closing out my swing position soon and adapt a strategy that will take advantage of a range-bound and/or choppy type market action. That being said, I continue to be long the e-mini S&P 500 Futures (ES).
Today I wouldn't be surprised to see limited consolidation action following the big move last week. We are approaching solid resistance overhead and I don't expect the market to ignore it...
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