Deflated Expectations Transfer to Stock Prices
I suppose I could begin today’s commentary with some reference to Friday the 13th, but that would be too cliché . So let’s look underneath the hood instead and try to determine what’s really going on.
Believe it or not, the economic data was not that terribly bad. Consumer Sentiment for November-2015 was quite strong @ 93.1 vs consensus @ 92.0 and previous @ 90.0. Relatively low unemployment and higher stock market prices have given some buoyancy to American optimism. Of course, a serious meltdown in equities could squelch that in a matter of weeks, but so far this is not what we are experiencing.
Weighing against the bulls are the weak results indicated in today’s Producer Price Index report for October-2015. The monthly change was -0.4% vs consensus @ 0.2% and annually it was -1.6% vs previous @ -1.1%, which marks deterioration from the previous period. This could give the Fed a reason to pause and defer the anticipated rate hike in December.
Another reason to reconsider its hawkish tone on monetary policy is the strength of the US Dollar, which is doing a lot of preemptive work against inflation on behalf of Chairperson Yellen and her team of governors. Add more lame GDP reports from Europe, not to mention the stagnant growth in China and Japan, and you offset trade for U.S. multi-nationals. Oh did I mention the dollar’s suppression of commodity prices as well?
One can see the deflated expectations for a rate hike as the inflation rate continues to fade from the Fed’s benchmark target of 2%. Yet, the market is confused and probably needs some reassurance from the Fed that it is sincerely committed to being flexible in its outlook and dependency on data. Good luck with that…
- Trends: ST = short-term; MT = Intermediate-term; LT = long-term
Oh well… The beatings shall continue until morale improves is about the only thing positive I can say about this market. The SP-500 took out another key support level, which was the triple bottom established in yesterday’s trading. Momentum is decelerating even more rapidly and the breadth of stocks trading with negative performance on surging volume overwhelmed any price increases i today’s trading.
Don’t buy and cry, but smell’em and sell’em and keep Hillbent for the Market Direction!
|Daily Chart Technical Analysis|
|New 5-day highs||15||New 5-day lows||369|
|New 52-week highs||19||New 52-week lows||42|
|Bullish reversals||66||Bearish reversals||22|
|% > 20 M.A.||% > 50 M.A.||% > 100 M.A.||% > 200 M.A.|
- ↑ = positive momentum; ↓ = negative momentum; and ↔ = neutral momentum
Volume Radar Alerts
- Vol % = volume percentage greater than average volume
- SIR = short interest ratio or days to cover
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