Fed Trumps North Korea

Here it is July 5th and we are back. The market continued its volatile ways while we were off and we expect more of the same for the near term. We can’t remember much about last Friday or Monday so let’s take a look at the trading on Tuesday.

Before the market opened there was more softness in the futures that had been down overnight. The media brought the North Korean missile tests out for traders to get the idea that was why the market was down. We don’t think that is the case but the media does have the authoritative final say in these matters, not the market…sarcasm still works.

Our last couple of posts were advising that a rally would be coming after the Fed raised rates and we got a pretty good run in the Dow. The move was fairly fast though as the actual peak in the Dow occurred near Friday’s open at 11,235 after trading down near 10,950 last week. That’s nearly 300 points in a few days. Monday’s shortened trading day was an up one with the Dow rallying about 78 points.

Trading for the rest of this week will be related to the jobs report due out on Friday morning, our normal pick for the high of the month. This week the market is paying close attention to the “strength” in the economy for signs as to what the Fed will do. To that end, the North Korean missile test does not really tell the market very much about what the Fed will do, but there was a report out on Wednesday forecasting Friday’s total nonfarm payroll will be growth of 368K. The current estimate is for a 170K increase. The market seemed to be spooked by this fresh estimate and, with the bond market reacting as it did (down), we tend to give this report some credibility. Since the broader market was down on Wednesday, we think that the market may have discounted some of this news already. Now, we just need to wait until Friday morning to find out.

Wednesday’s broader market dug some deep holes in the “Fed inspired" rally since the middle of last week. We are still looking to Friday morning for some good signals on the market. We did note that our momentum indicators have turned over bought in the last few trading days even with the light holiday trading. These are difficult days to trade.

On Wednesday, oil rallied to over $75 and this seems to rattle a few of the media folks. We have talked about the price of oil going up along with the stock market in the past several years. We don't see this as particularly interesting at the moment, oil goes up with the stock market. How do you trade that? Probably buy oil related stocks--which we don't really follow here.

We should have probably given you better advice about what to buy last week especially given our interest in the mining stocks. We saw that PAAS traded around 16.75 right before the Fed made its announcement and traded up to 18.60 early Monday morning for a very nice 10% plus trade. Oh well, maybe next time, in the mean time...

Be careful out there.

Dow Industrials: 11,151.82 -76.20
RYVNX: 22.12
RYAIX: 24.23
TLT: 83.24
BEGBX: 13.34