On Monday, the markets went up, then reversed down, on Tuesday, the markets went straight down, on Wednesday, the markets went straight up, on Thursday, straight back down, this kind of very choppy market behavior, is usually the result of Market Professionals adjusting their portfolios and preparing, for something coming down the road.
I think that the recent rise in U.S.Rates, from 2.10% back to 2.30%, is mainly the result of the very Hawkish chatter, coming out of Janet Yellen and the Fed and the fact that this week, the BOE’s Mark Carney, and the ECB’s Mario Draghi, both indicated that the era of “EASY MONEY” was coming to a close. All this might have spooked Big Money Players, who have enjoyed and profited, from the “EASY MONEY” environment for the past 10 years, into adjusting their massive portfolio’s, for a new Rising Rate environment, resulting in this week’s erratic market behavior.
Initially, the idea of paying more to borrow, will cause some problems for the markets, but when the reality that Rates go up only when the Economy is improving, sinks in, there will be new market winners and losers and I think that some of those new winners will be in the battered Commodity and Materials sectors. Remember as the U.S. and Global Economies improve, demand will increase and that will push up Commodity
prices, so NOW, might be the time, to START, positioning your clients in these sectors. THIS does not mean to go all in at once, but with these stocks so battered, a small position could generate large gains, so start S-L-O-W-L-Y and add on, BUT ALWAYS USE A STOP in case the Fed and the rest of the Central Bankers are wrong.
Overnight, Asia traded lower and Europe and the DOW are slightly higher. The Yield on the 10 Yr is flat at 2.27% and after trading up 20 basis pts in a week, Rates may stall at the 2.31% Resistance for a while. The Dollar continues lower, not because the U.S. is slowing, but because the rest of the World is speeding up. Commodities are mixed with the Metals off slightly and Oil up for the 7th day in a row trading at $45.40, but looking at Major Resistance at $46.00.
We have a full slate of data today, starting with the May Income & Spending and Core Inflation reports at 8:30. Later at 9:45 the June Chicago PMI report is out and lastly we have the June Consumer Sentiment numbers are out, but with the Fed in a very Hawkish state, I don’t think that any one set of numbers will change their course.
Today’s Early Markets
DOW Futures— up 30.00 London – up 1.58
S&P – up 400 DAX – up 24.56
GOLD—$1242 August Nikkei — down 186.84
OIL— $45.30 August HangSeng — down 201.78
DOW RESISTANCE 21,400 S&P RESISTANCE 2430
DOW SUPPORT: 21,200 S&P SUPPORT: 2410
$NASDAQ RESISTANCE 6200
$NASDAQ SUPPORT 6100