Janet Yellen stepped on stage yesterday and learned a real-time lesson on the gravity of her every syllable. In mentioning that a "considerable" period (between the end of QE, presumed to be the fall, and the first rate hike) is six months, she unwittingly triggered sell orders from the "ready-fire-aim" crowd.
The tape cascaded lower and registered a low tick of S&P (INDEXSP:.INX) 1850.35 -- which is a crazy coincidence for those who believe that technical analysis doesn't matter -- and bounced in kind as the bulls defended their turf and made a bet that Federal Reserve officials would backtrack and qualify the remarks, as Federal Reserve officials tend to do.
Sometimes you can learn a lot just by watching, and the price action that stood out to these eyes yesterday was the relative traction in the financials in the face of supply.
We've spent a lot of time identifying the technical road map for risk -- I'm a big believer that TA is a better context than catalyst -- and an upside breach of BKX (INDEXSP:BKX) 71.50, along with TRAN (INDEXDJX:DJT) 7600, will provide technical affirmation of the recent breakout in the S&P, NDX (INDEXNASDAQ:NDX), and Russell (INDEXRUSSELL:RUT) so long as they hold 1850, 3640, and 1182 respectively.
I've included the charts of the BKX and TRAN below
What else? Glad you asked. Here are some Random Thoughts, in no particular order:
- It would seem to me that China is trying to quietly swallow bad debt. Three thoughts there: First, much of the debt thus far has been digestible, which is why we've heard nary a burp. Second, the government has seemingly circled its wagons around the banks in an effort to guard against counterparty contagion. Third, China is acting as a buyer of last resort of raw materials that have been used as collateral in financing deals. Whether its actions help or hurt the global dynamic -- or both, as a function of timing -- remains to be seen.
- Quarter-end is eight sessions away, and that isn't lost on the animal spirits that lagged their peers last year. While invisible catalysts are always tough to game, we know that in periods of intense performance anxiety, the buyers are higher and the sellers are lower. Weave in all of the technical inflection levels mentioned above and that's a recipe for whippage.
- China and Japan were both down +/-1.5% last night although both remain above their respective levels of lore. That's Shanghai 1985 and Nikkei 14,000 for those following along at home.
- Germany is also trading above the all-important DAX (INDEXDB:DAX) 9000 level. We've spoken of the likelihood of a bounce into that zone as well as what might happen if it broke. See it, even if you choose to ignore it.
- Here is the link to the Minyanville Fireside Chat with Mark Dow. He offers terrific insight on policy, FOMC exit strategies, and geopolitical happenings.
- The deadline for Minyan March Madness is 11 a.m. ET. 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.
- Gold had a 17% run off the December 31, 2013 low and has lost a quick 5% this week. As such, I wanted to update our gold vs. S&P chart for those interested; the chasm is still pretty wide.
- Good luck today, and as always, I hope this finds you well.
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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 firstname.lastname@example.org.
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