"The market can remain irrational longer than you can remain solvent"
- John Maynard Keynes
Mkts celebrate the beginning of the new qtr! S&P notches a new intraday and closing high as investors take in the latest macro data - not a disaster at all, in fact mostly solid. It feels like it is trading on the fundamentals - which is what we want.
But is it? Is the mkt conflicted again from the message? Is the mkt moving on the improving economy or does it still believe that Janet and her "band of merry men" will keep the spigot on? Again - I ask....What is the message?
Two weeks ago - she appeared at her 1st press conference and said - full steam ahead....taper continues and rates will rise - the mkts shuddered just a bit. They did not throw a temper tantrum at all and that WAS perfect. It meant that investors and traders were beginning to understand that this stimulation HAS to stop .
Two days ago - she did a complete 180 - sent the message that the economy was still struggling and in fact continued to need extraordinary support - traders read that as a slowdown in the program and the mkt went into overdrive. So is it trading on fundamentals or on continued loose monetary support?
As the S&P makes new highs - is the risk of a bigger correction increasing as the P/E ratio continues to get stretched? Will new highs just beget new highs? Will the mkt remain a bit irrational?
The rational approach for large asset managers is to raise some cash as they prepare for a correction of sorts - not a panic sale at all - just normal portfolio management as they trade around a core position because many would sense that as the mkt moves higher with no pullback - the odds of a bigger correction increase.... What was a 5 - 8% move could become a 10 - 12% move so it makes sense to be cautious especially when one day Yellen says we are on the path the next day she says we are not.
The big eco data this week is today's ADP employment report and Friday's NFP (Non Farm Payroll ) report. Is the mkt expecting a "blow the windows out of the house" report? Expectations are for +200k jobs to be created....That is much better than the prior months and would be a welcomed event - although still below what we need consistently - but hey! Who's complaining? Two steps forward, one step back does work...over time.
The debate over current mkt structure continues...and this my friends is a good thing. The fireworks yesterday on CNBC is healthy and needs to be had....Many believe that current mkt structure is broken and this is exactly what leads many to believe that the mkt is 'rigged' (his words not mine) . In fact - the mkt is NOT rigged - it is BROKEN and there is a major difference.
Massive conflicts of interest have created a fragmented and fractured mktplace - it has allowed for high speed unscrupulous behavior, it has forced large asset managers to abandon the public mktplace in favor of the dark....It has in fact weakened the broader system - and this is the larger issue.
Automation is NOT the problem.....I am NOT calling for a return to what was (although that would be tremendous!) but I, along with many others are calling for an honest assessment of everything that is wrong with current mkt structure (Reg NMS) and move forward as a nation to fix it.
I am happy to discuss at any time and spend a fair amount of time speaking directly on this topic at industry and investor events - It's all about the conversation. Stay tuned.
US futures are flat this morning as investors digest the most recent moves and begin to prepare for the coming employment reports. What will they reveal?
Yesterday's close at the high now means that there is no real resistance any longer so a move up to 1900 would not be unexpected as traders test the waters to find where the natural sellers lie. Support is now solidly at 1875 - a level that proved to be significant resistance over the last month.
Overnight in Asia mkts were higher on the back of our action yesterday. Other than the earthquake in Chile - the newswires were quiet. Tsunami warnings have yet to prove any real devastation and our thoughts go out to our Chilean friends as that country re-groups. Japan rallied by 1% last night as talk of further stimulus boosted the mkt. Hong Kong +0.34%, ASX +0.26%. and China +0.57%.
In Europe -. FTSE +0.25%, CAC 40+0.08%, DAX +0.22%, Eurostoxx +0.06% , Spain -0.34% and Italy -0.6%
Make the brownies - undercook just a bit - cut and serve with vanilla ice cream, wet walnuts, Hershey's chocolate syrup and whip cream.
Buon Appetito.
- John Maynard Keynes
Mkts celebrate the beginning of the new qtr! S&P notches a new intraday and closing high as investors take in the latest macro data - not a disaster at all, in fact mostly solid. It feels like it is trading on the fundamentals - which is what we want.
But is it? Is the mkt conflicted again from the message? Is the mkt moving on the improving economy or does it still believe that Janet and her "band of merry men" will keep the spigot on? Again - I ask....What is the message?
Two weeks ago - she appeared at her 1st press conference and said - full steam ahead....taper continues and rates will rise - the mkts shuddered just a bit. They did not throw a temper tantrum at all and that WAS perfect. It meant that investors and traders were beginning to understand that this stimulation HAS to stop .
Two days ago - she did a complete 180 - sent the message that the economy was still struggling and in fact continued to need extraordinary support - traders read that as a slowdown in the program and the mkt went into overdrive. So is it trading on fundamentals or on continued loose monetary support?
As the S&P makes new highs - is the risk of a bigger correction increasing as the P/E ratio continues to get stretched? Will new highs just beget new highs? Will the mkt remain a bit irrational?
The rational approach for large asset managers is to raise some cash as they prepare for a correction of sorts - not a panic sale at all - just normal portfolio management as they trade around a core position because many would sense that as the mkt moves higher with no pullback - the odds of a bigger correction increase.... What was a 5 - 8% move could become a 10 - 12% move so it makes sense to be cautious especially when one day Yellen says we are on the path the next day she says we are not.
The big eco data this week is today's ADP employment report and Friday's NFP (Non Farm Payroll ) report. Is the mkt expecting a "blow the windows out of the house" report? Expectations are for +200k jobs to be created....That is much better than the prior months and would be a welcomed event - although still below what we need consistently - but hey! Who's complaining? Two steps forward, one step back does work...over time.
The debate over current mkt structure continues...and this my friends is a good thing. The fireworks yesterday on CNBC is healthy and needs to be had....Many believe that current mkt structure is broken and this is exactly what leads many to believe that the mkt is 'rigged' (his words not mine) . In fact - the mkt is NOT rigged - it is BROKEN and there is a major difference.
Massive conflicts of interest have created a fragmented and fractured mktplace - it has allowed for high speed unscrupulous behavior, it has forced large asset managers to abandon the public mktplace in favor of the dark....It has in fact weakened the broader system - and this is the larger issue.
Automation is NOT the problem.....I am NOT calling for a return to what was (although that would be tremendous!) but I, along with many others are calling for an honest assessment of everything that is wrong with current mkt structure (Reg NMS) and move forward as a nation to fix it.
I am happy to discuss at any time and spend a fair amount of time speaking directly on this topic at industry and investor events - It's all about the conversation. Stay tuned.
US futures are flat this morning as investors digest the most recent moves and begin to prepare for the coming employment reports. What will they reveal?
Yesterday's close at the high now means that there is no real resistance any longer so a move up to 1900 would not be unexpected as traders test the waters to find where the natural sellers lie. Support is now solidly at 1875 - a level that proved to be significant resistance over the last month.
Overnight in Asia mkts were higher on the back of our action yesterday. Other than the earthquake in Chile - the newswires were quiet. Tsunami warnings have yet to prove any real devastation and our thoughts go out to our Chilean friends as that country re-groups. Japan rallied by 1% last night as talk of further stimulus boosted the mkt. Hong Kong +0.34%, ASX +0.26%. and China +0.57%.
In Europe -. FTSE +0.25%, CAC 40+0.08%, DAX +0.22%, Eurostoxx +0.06% , Spain -0.34% and Italy -0.6%
Brownies a la Mode
Always a feel good dessert - I mean who doesn't love brownies and vanilla ice cream?Make the brownies - undercook just a bit - cut and serve with vanilla ice cream, wet walnuts, Hershey's chocolate syrup and whip cream.
Buon Appetito.
Recommended Content
Editors’ Picks
AUD/USD jumps above 0.6500 after hot Australian CPI data
AUD/USD extended gains and recaptured 0.6500 in Asian trading, following the release of hotter-than-expected Australian inflation data. The Australian CPI rose 1% in QoQ in Q1 against 0.8% forecast, providing extra legs to the Australian Dollar upside.
USD/JPY hangs near 34-year high at 154.88 as intervention risks loom
USD/JPY is sitting at a multi-decade high of 154.88 reached on Tuesday. Traders refrain from placing fresh bets on the pair as Japan's FX intervention risks loom. Broad US Dollar weakness also caps the upside in the major. US Durable Goods data are next on tap.
Gold price cautious despite weaker US Dollar and falling US yields
Gold retreats modestly after failing to sustain gains despite fall in US Treasury yields, weaker US Dollar. XAU/USD struggles to capitalize following release of weaker-than-expected S&P Global PMIs, fueling speculation about potential Fed rate cuts.
Ethereum ETF issuers not giving up fight, expert says as Grayscale files S3 prospectus
Ethereum exchange-traded funds theme gained steam after the landmark approval of multiple BTC ETFs in January. However, the campaign for approval of this investment alternative continues, with evidence of ongoing back and forth between prospective issuers and the US SEC.
US versus the Eurozone: Inflation divergence causes monetary desynchronization
Historically there is a very close correlation between changes in US Treasury yields and German Bund yields. This is relevant at the current juncture, considering that the recent hawkish twist in the tone of the Fed might continue to push US long-term interest rates higher and put upward pressure on bond yields in the Eurozone.