Interesting week, to say the least, with the spotlight on the FED being stolen by Amazon’s Jeff Besos creating quite a buzz on the internet… The memes have been a riot, do your self a favor and google “Amazon whole foods memes” and then thank me later… I promise you’ll laugh heartily.
The market watched closely for a reaction to Wednesday’s FOMC, rate hike of .25% to somewhere between 1.00% to 1.25% hence that curious little less than sign, <1.25% which is fuzzy math at best. A couple of key takeaways from Yellen’s press conference were as follows. The unemployment rate is following a “moderately lower path” reaching the historically low range of 4.3%. Showing that the economy has continued to expand at a modest level and she continued on stating that interest rates were “likely to remain below levels that prevailed in previous decades.” without overstating the case. She did go so far as to provide median projections through 2019.
1.4% at the end of this year
2.1% next year 2018
2.9% by the end of 2019
Yellen proceeded to announce that the Fed’s have some fancy smancy plans to normalize their balance sheet by unwinding as many of the bonds & Securities on their balance sheet as possible. Unable to commit to what those levels will actually look like, she did go so far as to say “we anticipate reducing reserve balances and our overall balance sheet to levels appreciably lower than in recent years, but larger than before the financial crisis.” It will be interesting to see how this plays out, Yellen alluded to the Federal Open Market Committee’s potential willingness to adapt if warranted by shifts in economic data and or policy… What does all this mean? Well it means that they’re hoping to be able to continue to raise rates as planned barring any “material deterioration in the economic outlook” that would require the Feds to revert back to using their “full range of tools” to help them achieve their mandate.
So for now, that means that if everything goes according to estimates they will continue to raise rates and reduce the size of their balance sheet, unless something bad happens and then they’ll go back to more accommodating policies up to and including their entire bag of tricks. What does this mean for stocks? Well, that’s a difficult thing to forecast long range, but in the near term, the market handled all of this information in style and the anticipated rate hike was priced in as stocks finished the week flat, eeking out minuscule gains on most of the major indices.
The biggest news of this week was a fun and exciting announcement by Amazon’s Jeff Besos about his plans to buy Whole Foods grocery chain. So AMZN is going to snatch up WFM which jumped nearly 9 points and whopping 26.63% as traders reacted to the big announcement. AMZN stock finished the session on Friday up 3.8% to $987.71 Shocked by Amazon’s bold and brazen move, the consumer staples sector ETF, the XLP, took it on the chin a little as the shock of the news sent traders into selling mode before rallying late in the session to end down a little over a point and 1.8% down on Friday’s trading.
Like I said earlier, interesting week, for what was otherwise a pretty boring week, at least as far as the broad market indices are concerned, finishing with mixed results that were in a word, flat. S&P finished flat up, the NASDAQ finished flat down, the Dow drifted uninspiringly higher and the RUT pulled back to retest the $1400 after briefly pressing the all-time high, but remaining within the sideways consolidation pattern that has been year to date.
Make sure to check out this week’s Market Scoreboard for further insight into the technicals of the broad market and to gain some perspective on how the various sectors are faring and use the scoreboard to help you determine which sectors to scan in for bullish trade setups and in which sectors to scan for bearish trade setups. Trading with the overall market trend is as you know one of the keys to successful trading and adding in sector analysis to your repertoire will only serve to bolster your results.
This week bullish opportunities abound in the vast majority of the sectors with the exception of the Energy Sector which has continued to show weakness as has the U.S. dollar, which continues in a downward trend, although with some signs of slowing down and the rate hike and plans to continue to slowly but surely raise interest rates, could strengthen the dollar while potentially tempering the broader market, which in the opinion of some as being over-valued. Our bias remains bullish in general, don’t be surprised if we see a selloff in the second half of June, before a July Rally, based on the Seasonal Trading Patters established over the last 15 to 20 years of modern trading, look to the sectors for ques and as always, trade with proper position sizing and stop losses on all of your favorite stock picks.
- AAL, BX, CRM, CTRP, LEN, LOW, MO, MSFT, SBUX, VEEV, YNDX
- CAH, COP, CUBE, GE, HOG, PFE, SYF
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