Market Direction: BULLISH alert
issued 6/2/2016
The economy
The S&P 500 spent the first four days of the week inside a 14-point range, but a Friday sell off pressured the index below its 50-day moving average (2164.0) for the first time since early July.
Global markets tilted to the downside as participants responded to a negative set of economic data and news that North Korea carried out another nuclear test. However, the negative headlines failed to elicit a bid in the bond market. The counterintuitive move in bonds incited further angst regarding yesterday's policy statement from the European Central Bank and rising fed funds rate hike expectations.
The ECB released its September policy statement yesterday, holding its monetary policy stance steady. The central bank opted to keep its key interest rates at record lows while maintaining the size and scope of its asset purchases. Furthermore, ECB President Mario Draghi struck a hawkish tone, indicating that the Governing Council didn't discuss extending the asset purchase program at the latest meeting.
DoubleLine's Jeffrey Gundlach added to rate angst, stating after yesterday's close that it's time to get defensive on bonds. The bond fund manager argued that a shift in longer-term inflation risk will drive monetary policy going forward. On that note, Boston Fed President, and FOMC voter, Eric Rosengren struck a somewhat hawkish tone today, stating that there is a reasonable case for continuing on the gradual path towards interest rate normalization. Furthermore, Fed Governor Daniel Tarullo said that he wouldn't foreclose the possibility of a rate hike this year.
Rate hike expectations edged up when compared to last Friday. The implied likelihood of a rate hike in September inched up to 24.0% from last week's 21.0% while the implied probability of a December hike climbed to 58.4% from 54.2%.
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By the numbers the weekly closing index numbers compared
to the initial BULLISH recommendation closing
numbers:
Stock Market Closing Numbers
|
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compared to Recommendation Numbers
|
|||
6/2/2016
|
9/9/2016
|
Difference
|
|
17,838.56
|
18,085.45
|
246.89
|
|
4,971.36
|
5,125.91
|
154.55
|
|
2,105.26
|
2,127.81
|
22.55
|
|
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