The opinions expressed below are my own and do not necessarily represent those of Visdom Investment Group, LLC.
Vanilla bounce
News over the weekend and throughout the day didn’t spur much movement in out markets. The S&P 500 opened up about 20 points and rallied to the +50 point level in the morning. By lunch, the index found +57 as a level and it wandered around that for the rest of the day. The yield curve didn’t move much but it did flatten a bit, for what it’s worth. Crude too, didn’t do much when it was all said and down. It started the day down $2 or more and finished down about a buck. Stocks, bonds, and oil kept calm.
The bounce in the S&P might be a reflexive answer to late last week. Chart followers might see Friday’s action as a close-enough test of the 100-day (7605) to get in and see if the 50-day (7698) can be broken to the upside. In a quiet market, it’s as good a trading plan as any.
I don’t have much enthusiasm for anyone making that move however. I think the FOMC decision and press conference on Wednesday will override any price pattern that gets established between now and then.
The Street expects the FOMC to leave rates as is. The Fed Funds futures market only prices a hike with 10% probability. Wall Street strategists expect the FOMC to stand pat as well. The communication from the FOMC, specifically the press conference, is what’s most anticipated and uncertain. The Street thinks that a December hike is highly probable. Futures price a hike then at 80%.
Will the Fed give any hints that the Street is perceiving things correctly? Will it hint that a December hike could be it? Will it hint that the hiking cycle might be briefer than the Street currently expects?
Any and all hints will move this market significantly and I think most investors are holding off on acting until they hear from the Fed.
See you tomorrow.
-Mike
Visdom Market Commentary
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