Todd Harrison: Looking Ahead to Janet Yellen and Quarter-End
Performance anxiety enters an already crowded equation.
Quarter-end is creeping closer with each passing day, and that isn't lost on the animal spirits in the marketplace. With the Nasdaq (INDEXNASDAQ:.IXIC) and S&P 500 (INDEXSP:INX) up +3.75% and +1.36% year-to-date respectively, fund managers can do the math (18.6% and 6.5% annualized).
Fear and greed, greed and fear, rinse and repeat; in periods of performance anxiety, the buyers are higher and the sellers are lower.
Top-down, not much has changed between last night and this morning. Our primary technical levels (S&P 1850, NDX (INDEXNASDAQ:NDX) 3640, RUT (INDEXRUSSELL:RUT) 1182) are below (which is bullish) while tertiary confirmation (BKX (INDEXSP:BKX) 71.50, TRAN (INDEXDJX:DJT) 7600) resides above. All the while, numerous headlines compete for our collective attention as we digest the fallout from Russia and structural uncertainties in China.
We hosted an excellent Fireside Chat with Mark Dow last night, and I was particularly interested in his take as he's been steadfastly bullish off the 2009 low, in large part due to his grasp of policy. I don't want to spoil the recast (airing this afternoon), but I can share that while Mark wouldn't be shocked to see a correction at any time, he believes we've got room to run through a secular lens. Interestingly, in terms of potential risks, he ranks Europe ahead of China and Russia (in that order).
The focus today is on Janet Yellen as she chairs her first Fed meeting. Traders will be listening for any hints for the future (the text will cross the wires at 2 p.m.). I don't foresee her intentionally rocking the boat, but you never know in our "ready-fire-aim" environment. And I encourage you to view the Mark Dow interview when it hits as he also touches on the Fed's exit strategy, which will help shape the central bank dynamic.
Closer to home, you've got until tomorrow morning to get your brackets in for Minyan March Madness. The winner will receive a lifetime subscription to the Minyanville subscription product of his or her choice and a snazzy gift bag, while "non-winners" will have the right (but not the obligation) to make a donation of their choice to The Ruby Peck Foundation for Children's Education. This is the best sporting event of the year; there's nothing wrong with adding a little spice to the mix!
A few rules of thumb on FOMC days: The first move is typically the false move, and liquidity will thin on either side of the release (read: put limits on your orders).
The breakout through S&P 1850 -- which retested and held -- "works" through a pure technical lens to S&P 1960, or roughly 5% higher. The bulls would be a lot happier if the trannies and banks confirmed, but they'll take what they can get -- especially if they continue to be rewarded for buying dips.
There has been a lot of pushback against the work of Tom DeMark lately, particularly the 1929 analog that made the rounds. This report is the "other side" of that stance and is worth five minutes of your time. I am, in full disclosure, a big fan of Tom's work.
I've been watching stocks for 23 years and I'll again say that Twitter (NYSE:TWTR) has been trading funky for some time. I'm a fan of the platform, and maybe it's Facebook (NASDAQ:FB) near $20 (when it traded funky), but I'm not currently involved in the stock.
- Why is TRAN 7600 so important? Check the chart below; a push through would trigger a reverse head & shoulder pattern that would "work" north of TRAN 8000 through a pure technical lens.
I had Florida, Kansas, Syracuse, and Michigan State in my Final Four before the seeds were announced (that had to change given the first three teams are all in the South). And the fact that so many people have Sparty in the Final Four is perhaps the single biggest reason they won't get there.
- Gold has enjoyed a nice run on recent geopolitical concerns and is pulling back a bit today. I wanted to update our gold vs. S&P chart for those interested; the chasm is still pretty wide.
Minyanville.com launching before blogs and social media is the digital equivalent to walking five miles through the snow to school. Long strange trip!
Would it really shock you if Russia tried to cripple capitalism in the heat of the financial crisis? (h/t @znmeb)
Speaking of helping to explain a lot, nice going, Einstein!
- Good luck, and let's be careful out there!
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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 email@example.com.
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