Friday Was a Dud

After a stunning turnaround on Thursday afternoon, the market failed to show much follow through on Friday.  After all was said and done, the Dow dropped nearly 50 points after being only modestly higher in the morning.  But, of course, Monday brings a new week and fresh bullish notions.  

For our part, we think that the market made a nice momentum low back in May down around the 11,098 level in the Dow and Friday we got to see a lower price low down at 10,891 on Friday’s close.  Thursday intraday low was much lower, near 10,750 which could be a pretty good low for the time being.  Markets don’t generally go straight down and this one won’t either, at least as long as we are in the early stages of the decline.  Panic may come as the decline keeps going.

Right now, we need to focus on what is directly in front of us, the new week.  With all of this selling in the past month or so, the Fed wants to feel done with its rate hikes in sharp contrast to all of the rhetoric from them the last few weeks.  They are trying to look tough on the surface so the market is finally going down a bit in the wake of Fed comments.  

This week brings the two biggies for the Fed, the CPI and PPI.  You may recall last month when the Core CPI was 0.1% higher than expected and that drove the Dow down about 200 points.  This week expectations are for the PPI, out on Tuesday, and the CPI, due out on Wednesday, to show similar numbers both for the total and the Ex-Food and Energy number, you know the “Core” inflation.  Anyway, the total for both is expected to have risen 0.4% while the Core is expected to be 0.2% higher.  

We just don’t know what to expect this week.  The bond market has been moving up, a little weakly, but up, over the past week or so.  That could mean that inflation expectations are higher than the actual number or since the advance was weak the bonds could get taken down after a high inflation number comes out.  Like we said, we don’t really know what to expect.  

All we can say is that the market has lost its downward momentum and since the Thursday low it looks like it wants to show some sideways to up motion for a little while.  Until we can see some more definitive action, we will wait.  Yes, we still have our bearish positions but we aren’t sure this would be a good time to sell.  After Monday’s trading we will have a better idea.  The last few Monday’s have been down days which is unusual in itself.  

At any rate, we are looking forward to the next week of trading.  Options expiration may lead to some volatility this week so we are watching that, too.  But, if you are looking to sell into some strength, this may be a good week to do it.  We will be back again tomorrow to see how the week started.

Be careful out there…  

Dow Industrials:  10,891.92  -46.90
RYVNX:   22.26
RYAIX:  24.19
TLT:  85.72
BEGBX:  13.43