How much wood could a woodchuck chuck if a woodchuck could chuck wood? What does that have to do with the market outlook? About as much as China, FOMC meeting and oil prices. Irrational markets bring irrational responses. If you look at a chart of any major index it will make you nauseous with the moves up and down. The good news is the swings are in reasonable range, but the bad news is neither side wants to own the markets direction. That is commonly referred to as uncertainty and it is caused by a lack of clarity. Have a good evening… in reality I could and should stop with that comment as it really does summarize the market currently. Playing golf or hiking through Napa Valley tasting wine is way better than looking at this mess. Maybe the wine would make more palatable?
There are always two side to a coin and their are those who love this type of market cycle and thrive on the lack of clarity and uncertainty of the stops and starts of each pivot point. It isn’t my cup of tea and thus, my comments. All that said, I did run scans today and what we see on the last two days is a bounce off support levels. It is led by the oversold sectors like energy, basic materials and industrials. Hell even the transports reversed on the positive earnings beat from UPS. The interesting part of that news was they warned about forward guidance due to uncertainty in the global economies. But, the stock is up 6.5% on the news. Go figure. As I have said many time in the last four months… technical data is the only thing working from my view. The stories behind the trends and setups technically have done well. The rest of it continues to be sea of confusion and a roller coaster ride.
Oil pushed higher by 1.5% on the day as the supply data showed bigger drops in supply than estimated. The distillates were higher, gasoline lower and off to the races the price of crude went. The bigger question from my view is sustainability in light of the news from Iran shipping crude again and the rest of the oil producing world not slowing production. The wild card for this topic is demand? If China’s economic picture is slowing, If Europe can’t jump start growth soon, and the other parts of the world are not faring much better… where is this demand coming from? Exactly… technical trade in the commodity set up today. If it follows through happy to trade it. If it fails… next opportunity please. Don’t force trades in areas that remain in the headlines as oversold… like gold. If the shoes doesn’t fit…
FOMC meeting concluded today with little to show. The headlines effectively stated that the Fed shed no light on the timing of the interest rate hikes. That is exactly what happened. September is still a possibility for the Fed. I am not sure I would want to play a game of chicken with them at this point, but the IMF and China are putting pressure on the Fed to delay any hikes until 2016. Time will tell, but the rumors are flying on both side of the debate. Watch interest rates for clues on what the consensus is about this subject. Rates have been falling again and bonds have rallied in response.
Emerging markets, Russia, Oil, Energy stocks and Europe all bounced putting an end to the short trades in each today. It doesn’t mean the selling is over it just means the temporary belief is they were oversold and thus a good trading opportunity which in turn hit our stops. Time will tell how this unfolds from here. I will be more than happy to put the trades back on should that be the direction we head meaning this is a false bounce. All we can do is take one day at a time and let the trends set the trades and our stops keep us from overstaying our welcome. Tomorrow is another day… see you then.