MV Weather Report: Will Bulls Get Snowed?
Rain or shine, we review the day's biggest stock stories.
The buyers were aggressive today, and the market had a performance-anxiety feel to it. The S&P rocketed up 3.20% to close at 778.
Professor Jeff Cooper talked about the importance of 774 today, which oddly enough is right above the close for the day.
"Yesterday, the S&P traced out a textbook 3 drives to a high at 774 and then double topped at that level.
"As offered in yesterday's Buzz that was a level and pattern worth watching as 774 is 360 degrees or one full revolution in price up from 666/667 (as shown in a 10 min SP chart from last nights report seen below)."
Click to enlarge
This has been an extreme move for the indices and an amazing bear-market rally. A lot of stocks are really starting to take off - just take a look at tech: Apple (AAPL) is breaking out, and Amazon (AMZN) and Netflix (NFLX) made new 3-month highs today. Then there are the financials, which have also made extreme moves: Metlife (MET), Wells Fargo (WFC), Goldman Sachs (GS), Bank of America (BAC), etc.
As readers know, I've been flirting with the idea that this market has rallied too fast, too soon. Today makes me think the bulls are really overplaying their hand.
That being said, a couple of things bother me for a short-side trade. Markets can remain overbought for some time, and performance anxiety is really beginning to set in, especially with quarter's end approaching. Do they take the tape higher and then sell into the beginning of the second quarter? That scenario is looking plausible.
As for tomorrow, traders will be watching for economic data: Before the bell, there will be the CPI report and the current account balance.
But the true focus of the day will be the Fed meeting. I believe the Fed will keep the rate as-is; in fact, I'd say there's a 96% chance the Fed will do nothing. But the meeting might be important for other reasons. As Professor Lance Lewis said on the Buzz today:
"The FOMC will issue its statement tomorrow at the conclusion of its 2-day meeting. With interest rates already at virtually zero, there's obviously not going to be any change in that department. However, I do believe there is a high probability that the Fed will follow the Bank of England's example and begin buying government bonds (i.e. – quantitative easing or "printing money") on top of the agency debt and MBS that it is already monetizing.
"If so, then I would also expect the euro and some of the other major currencies to rally against the dollar, and for asset prices to rally in general, with the gold complex likely outperforming given the obvious inflationary nature of what the Fed is doing.
"Despite the long-term inflationary nature of such a Fed move, Treasury bonds would no doubt also rally on the news of such an announcement, as shorts get squeezed, much like they did both back in November when the Fed merely hinted at buying the long end and more recently in the UK after the BOE announced its QE program. For anyone still long the TBT (Ultrashort 20 Plus Treasury ETF), I'd be very careful."
Have a great St. Patrick's Day - don't drink too much!
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