Todd Harrison: Janet Yellen, Emerging Markets, and Mercury Retrograde

By Todd Harrison  FEB 11, 2014 11:10 AM

What to watch on Turnaround Tuesday.

 


Editor's Note: Todd posts his vibes in real time each day on our Buzz & Banter.

Global markets took it on the chin at the beginning of last week, capping off a rather scathing two-week stretch.

True to the path of maximum frustration, they rallied sharply at the end of the week, working off the oversold condition and taking the tape back to the all-important S&P (INDEXSP:.INX) 1800 level, where it opens for today's trade.

While I'm not a huge fan of short-term correlations -- you can data mine pretty much anything with a short enough time horizon -- a trusted pal noted the relationship between the iShares MSCI Emerging Markets ETF (NYSEARCA:EEM) and the SPDR S&P 500 ETF (NYSEARCA:SPY) since the beginning of the year, a chart I've included below.

His observation is that EEM has led SPY since tapering has been on the table, and we would be wise to note the dynamic on an ongoing basis.

I've said in the past that I would get on all fours and watch the grass grow if I thought it held predictive clues to our forward price action, and I share this with that intention.

Obviously, there's a lot more going on today, but we'll get to that in a moment.



Orange Is the New Black

Have you been feeling on edge of late? Like the world is moving a bit faster than usual?

To borrow the wise words of Dr. Sean Maguire, "It's not your fault, it's not your fault, it's not your fault!"

According to Jeffries, of the 308 of the S&P 500 companies that have reported this season, 25% have moved over 5% on the day of announcement and 8% have moved over 10%. Consumer discretionary stocks in particular stand out for dramatic earnings moves: Of the 37 companies that have reported, over 50% have moved 5% or more the day of the announcement and 27% have moved over 10%. That's a massive increase in volatility over previous reporting quarters -- there have been nine consumer discretionary stocks that have moved over 10% on earnings this quarter vs. one stock that moved that much two quarters ago. (Hat tip, Rareview.)

You're Yellen! My Mustard? No, You're Fed Head!

Janet Yellen started her reign as Chairwoman of the Federal Reserve this morning with several prepared remarks to the House panel. Among the juicier headlines:
The report was more or less in line with expectations, with a little something for everyone as we've come to expect from a Federal Reserve trying to massage a Goldilocks message (not too hot, not too cold and just right). While some expected her to put her thumbprint on policy, she took strides to respect the institution, as well as the man who appointed her.

Move along, there's nothing to see here folks? Time will tell; the judge and jury that is the market is about to walk into the courtroom.

Random Thoughts:
R.P.

Twitter: @todd_harrison

No positions in stocks mentioned.

Todd Harrison is the founder and Chief Executive Officer of Minyanville. Prior to his current role, Mr. Harrison was President and head trader at a $400 million dollar New York-based hedge fund. Todd welcomes your comments and/or feedback at todd@minyanville.com.

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