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Stock Market Waiting for the Fed

Stock-Markets / Stock Markets 2018 Feb 21, 2018 - 12:43 PM GMT

By: Anthony_Cherniawski

Stock-Markets

Good Morning!

SPX futures are flat with little overnight activity as I write. The theme seems to be “Waiting for the Fed.”

Bill Blain comments in Blain’s Morning Porridge, “Back on Planet Sensible, I was asking round the trading desks this morning for any particular themes or issues they’ve been picking up from clients. Nobody seems to be enjoying February.

You must understand my colleagues and crew are a hard-bitten crowd of former investment bankers, traders and other financial desperados who’ve spent careers up to their eyeballs in financial mayhem and gore… “Last chance to sell,” was the answer from one particular cynic.”


USD futures are rising modestly, but consistently in the overnight session.

The Cycles Model indicates a probable burst of strength today. In addition, there appears to be another burst of Cyclical strength through the week starting March 5.

ZeroHedge reports, “The dollar rose to its highest level in a week against its G10 peers on Wednesday, rising for the 4th day against the yen and most pairs as investor focus shifted to the minutes of the Federal Reserve’s last policy meeting.

The dollar hasn’t had it this good this year, bouncing 1% so far this week after slumping 1.5% last week to the lowest level in 3 years, as traders unwound short positions ahead of today's January FOMC minutes (where the most likely surprise would be the Fed's endorsement of 4 rate hikes in 2018), with investors looking for clues on just what policy makers had in mind when they added “further” twice to their guidance on interest rates.”

TNX futures have levelled off during the overnight session. It is very late in the Master Cycle so the chance of a low appears to be disappearing. Instead, it appears that there may be a Cycle inversion, where TNX hits its Wave (5) high over the next two weeks.

The alternate view may be that the Fed disappoints, causing TNX to pull back. The weekly chart shows a potential Cup with Handle formation with a probable target of 39.33. Cup with Handle formations target the end of the final Wave of a series (Wave 5). That would change my view on the current count, should TNX have a pullback over the next week or two.

ZeroHedge comments, “The Dollar is suddenly rising and rate hike expectations are now at their highest of the cycle - 2.76 hikes in 2018 are priced in - (despite stocks still not being anywhere near back to pre-Powell-put-implied levels).

But as Rafiki Capital Management's Steven Englander notes, the most likely surprise in the Fed Minutes tomorrow is that they may be leaning to four hikes in 2018, but the biggest surprise would be growing support to aim for above two percent inflation temporarily to make up for previous misses to the downside.”

VIX futures appear to be pulling back this morning. It may simply be a retest of the Cycle Top support at 19.83.

It appears that the markets are on a narrow consolidation until this afternoon.

Regards,

Tony

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As a State Registered Investment Advisor, The Practical Investor (TPI) manages private client investment portfolios using a proprietary investment strategy created by Chief Investment Officer Tony Cherniawski. Throughout 2000-01, when many investors felt the pain of double digit market losses, TPI successfully navigated the choppy investment waters, creating a profit for our private investment clients. With a focus on preserving assets and capitalizing on opportunities, TPI clients benefited greatly from the TPI strategies, allowing them to stay on track with their life goals.

Disclaimer: The content in this article is written for educational and informational purposes only.  There is no offer or recommendation to buy or sell any security and no information contained here should be interpreted or construed as investment advice. Do you own due diligence as the information in this article is the opinion of Anthony M. Cherniawski and subject to change without notice.

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