It was a news driven day for the markets. Unfortunately some of the news was pure speculation, some was conjecture based on assumptions that may or may not materialize, and some was just good old fashioned rumors. Unfortunately there was little factual data provided on the topics in the headlines, but I am sure it will all become fact or fiction as we move forward. You have to like a good story that is told so well it moves market direction for or against the story line. In the end facts win, but in the meantime a good story keeps the traders entertained.
Headline: “Stocks move higher on Fisher comments!” Vice Chairman Fisher hinted the US central bank may not lift interest rates until inflation returns to normal levels. Response: Stocks rose more than 1% on the major indexes from the open. The yield on the ten-year bond rose six basis points to 2.23%. Bonds were under pressure all day on the Fed comments. Reality: Prices moving on speculation is temporary. You can not and should not make investment decisions on what the Fed may or may not do. Emotions are a double-edged sword and it is important to maintain focus on your strategy and the disciplines surrounding them.
Europe (IEV): The chart shows the challenges in a perfect picture. Downtrend line equates to the 50 DMA. Consolidation currently between the 50 and 200 DMA. A cross of the 50 below the 200 DMA is setting up, but the analyst are calling for this to be a great investment opportunity moving forward. Technically speaking… some things need to change if that is to take place. That said, a break back through the 50 DMA is interesting for a trade opportunity. Watching for some leadership going forward in the global picture.
Apple (AAPL): announced they were holding an iPhone event on September 9th. Sorry, they are expected to hold an event the week of September 7th… most logically the 9th as reported by Buzzfeed News. In other words Apple didn’t really announce anything, but they are expected to, “according to a source”, and the stock jumped 3.5% or $119.90. I love Monday’s… they bring such interesting tidbits of information. When you get a catalyst from the Vice Chair of the Fed it only makes it more interesting for all.
Crude Oil (USO): started lower early, but joined the Fed parade gaining more than 2% on the day. A move back above the 10 DMA would be positive and a possible reversal of the current selling that started in early July. Again, there are no facts to substantiate the move and that leaves us with more speculation in the sector that has confirmed the lack of demand and rising supply. The last two weeks we have seen a drop in supply… maybe the speculators are right and the worst is over for oil? Only time and facts will tell. I am not good on the speculation side, but if the trendlines are broken there is an opportunity worth trading in crude. This could easily overlap into the oversold energy stocks. Definitely worth putting on the watch list.
China (FXI): rallied 5% to ease some tension in the US markets relative to the current conditions in China economically. The rally in China also helped commodities prices, see oil above. More government stimulus is expected as the exports were below expectations. Sounds like most countries around the world where if it can’t grow on its own put more stimulus into the system. The short squeeze is on in Chinese stocks following the big sell off in June. The move on Monday shows the beginning of a reversal off the lows the last two weeks. Patience as this unfolds and we attempt to define if the bottom is in for China. Trading opportunity only for now.
Tomorrow will be of interest to define how much conviction is behind the move Monday. The volatility index fell back below 13 to close at the 12.3 mark. All is well and all the worries are forgotten… maybe.