(The Weekly Digest reproduces the morning capsules made available every morning before the market open in the Real Time Feeds to the paying subscribers. )
FED CHICKENS OUT, WHAT IS NEXT?
Our call in yesterday’s Morning Capsule has turned out to be spot on.
The big money is positioned for the Fed to either not raise rates or raise rates accompanied by an extremely dovish statement.
If big money turns out to be right, expect a mild rally. The big money will likely sell into the rally potentially causing a sell-off.
After the Fed chickened out and did not raise rates, the stock market went up over 100 DJIA points and then started falling as we had predicted. Now DJIA futures are approaching down about 300 points from the high after the Fed announcement.
Our interpretation of the Fed statement and Yellen conference is that now China is up front and center.
Gold and bonds are moving up, oil is falling as is to be expected.
Our very, very short-term early stock market indicator is negative.
What To Do Now?
The Fed’s action is going to cause more volatility. The plan is to take advantage of the volatility by buying the riffs and selling the rips. As opportunities present themselves, you will see posts in the Real Time Feeds.
Gold futures are at $1138, silver futures are at $15.31, and oil futures are $45.36.
S&P 500 resistance levels are 2000, 2017, and 2038; support levels are 1920, 1860, and 1838.
DJIA futures are down 274 points.
PAY ATTENTION TO BIG MONEY POSITIONING AHEAD OF THE FED
How the market reacts to the Fed depends on the positioning of the big money ahead of the Fed.
Big money is not always the Smart Money but it typically carries the day in the very short-term.
The big money is positioned for the Fed to either not raise rates or raise rates accompanied by an extremely dovish statement.
If big money turns out to be right, expect a mild rally. The big money will likely sell into the rally potentially causing a sell-off.
If the big money’s positioning is wrong, expect a sell-off.
Oil ran up on bullish headlines. Such run up is misplaced because when gasoline and distillate are taken into account, the data was bearish.
Gold and silver are being bought aggressively by the momo crowd and gold bugs.
Interest rates are hanging near their highs.
Our very, very short-term early stock market indicator is neutral.
What To Do Now?
Time to sit back, relax and wait for the Fed.
Gold futures are at $1115, silver futures are at $14.87, and oil futures are $46.55.
S&P 500 resistance levels are 2000, 2017, and 2038; support levels are 1962, 1920, and 1860.
DJIA futures are down 48 points.
BIG MONEY THINKS CORRECTION IS OVER AHEAD OF THE FED
Yesterday’s trading action was remarkable. Big money was selling fixed income instruments (bonds and notes). More importantly, big money was deploying proceeds from the sale of fixed income instruments to buying stocks.
Interest rates rose across all maturities. Of special note is the spike in two year Treasuries. The two year note hit 0.815%, the highest level since 2011.
It is remarkable that the big money is front-running the Fed.
Professional traders were aggressively selling volatility as they took their clues from the big money.
Is the correction and volatility over? Not so fast! All the big money is not necessarily Smart Money. Smart Money was mostly inactive.
This morning gold and silver jumped on the headline CPI number which fell 0.1%, the first fall since January. The consensus was no change. Running up gold and silver on headline CPI number is a mistake. The reason headline CPI number fell is the drop in gasoline. The Core CPI rose 0.1% vs. 0.1% consensus.
Oil is also running up as ‘risk on’ becomes fashion of the day.
Our very, very short-term early stock market indicator is neutral.
What To Do Now?
Consider not initiating and not adding to positions before the reaction to Fed’s move is known unless there are specific posts.
It is prudent to not take a big risk here.
Also note that historically a majority of the time the first move after Fed’s decision is a false move and then it reverses.
Consider continuing to hold existing positions.
Consider holding a large amount of cash.
Gold futures are at $1112, silver futures are at $14.74, and oil futures are $45.66.
S&P 500 resistance levels are 2000, 2017, and 2038; support levels are 1920, 1860, and 1838.
DJIA futures are down 15 points.
LISTLESS MARKETS ACROSS THE WORLD WAITING FOR THE FED
Markets are listless across the world waiting for the Fed. The only exception is China which fell about 3% overnight.
The U. S. Retail Sales ex-autos came a 0.1% vs. 0.2% consensus.
Industrial Production came at -0.4% vs. -0.2% consensus; however prior revised to +0.9% from +0.6%.
Interest rates, gold, silver, oil, and copper are all range bound.
Our very, very short-term early stock market indicator is neutral.
Gold futures are at $1106, silver futures are at $14.34, and oil futures are $44.50.
S&P 500 resistance levels are 1962, 2000, and 2017; support levels are 1920, 1860, and 1838.
DJIA futures are up 55 points.
THE BEST INFORMATION ON FED
Here is our best information on Fed.
- The Fed is evenly split about September rate increase. At this time, even the Fed does not know what it is going to do.
- The trades by short-term professional traders show a 28% probability of rate increase in September, 8% probability of rate increase in October and 55% probability of a rate increase in December.
- Institutional investors are positioned about 40% probability of rate increase in September, 0% probability in October and 60% probability in December.
What To Do Now?
Consider not initiating or adding positions before September 17th afternoon when the Fed decision will be known unless there is a specific post.
If you bought near recent lows, consider taking profits.
Hold fair amount of cash.
Our very, very short-term early stock market indicator is neutral.
Gold futures are at $1104, silver futures are at $14.37, and oil futures are $44.34.
S&P 500 resistance levels are 2000, 2017, and 2038; support levels are 1920, 1860, and 1838.
DJIA futures are down 28 points.
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