Not much to write about today. The biggest news is that the NFL might review its “take a knee” policy and that as you know would overshadow any economic news. I did find headlines about the Chinese government taking an “active” role in the big Chinese internet companies and I am thinking long term that cannot be good. BABA and BIDU were both done a bit after torrid runs. My story for today is WMT because it broke the 3 day rule I just wrote about and what the heck I own it too.
Come register for our Daily Option Class here
The market for volatility, the VIX, got a one, two punch for the BOJ and the Fed. They basically said they will do things in the future. BOJ to target rates, possibly less QE and the Fed for a likely Dec and 2017 rate rise. They bought time and they bought space to take out some of the lingering doubts about rates in the mid-term and certainly before the election.
Stocks are staring at the 2200 SPX level and blinking. Since there is no real impetus to drive things higher buyers are content to sit where they are and wait. For some reason the Yellen at Jackson Hole speech is starting to take on meaning. With a market lacking meaning anything is a reason to move us. Gold and gold related names like the miners are getting hit hardest.
2015 gave us VRX and the corporate perp walk of the year as the CEO got grilled for jacking up the acquired drug prices. Congress gave VRX the smear job and the stock lost 90% at the low earlier this year. My blog of last week talked about VRX and yes it is time to buy juice in there again. That is not my subject. Congress might have a new dog to beat and the name is MYL.
So the Fed turns a bit hawkish and wants to raise rates. There seems to be the opinion that this fall at some point rates will nudge up. That has done nothing to dampen bonds and prices jumped again. Since we are the only G7 country paying interest I guess higher rates make US Gov bonds more attractive? That also says something about volatility.
It sounds scary but it is not.
The Santa Rally is in effect for now. SPY managed to eke out gains for the year helped not one wit by AAPL. The late in the year commodity rally is not hurting either. OPEC says oil will be back to $75 in 2019 or whatever and that was enough to lift crude a buck or two. The story is still volatility as most of the headline volatility products are still showing signs of life. That means the VIX futures have yet to collapse.
The morning looked solid today as stock ran on GOOG, FB and AAPL rallies. Financials look good as BAC is finally getting out from the constant deluge of fines from the financial crisis. All was going just fine until reports of unrest in Greece started rumbling through the markets. Treasuries spiked even into Yellen's hawkish rate tones. Something happened and it had nothing to do with the USA.
Yet we have another FOMC announcement with the Fed choosing to do nothing. I don’t know how far the economy has to grow before rates start to normalize but we have to be getting close now. We had the 90’s and a government surplus and higher rates and no one was complaining. Once again post-meeting the VIX dropped even with near sure 25 basis point rises in 2015 mapped out.
As long as one of the big 4 (EU, Japan, USA or China) is still in the QE way stocks are bound to tumble on good economic news. USA is out, China thinking and Japan and the EU are in full swing. Today the EU is reaping the benefits of tough fiscal policy and looser monetary policy with growth looking better so stocks sold off. The strange result of QE is that good news is bad news for stocks and that is the present reality. To the extent this small selloff lasts will probably be answered by the ADP number in the morning. We will probably bounce on a middling number.