The Fed is Done...Again

The Fed is Done, the Fed is Done, the Fed is Done…We thought maybe the “Fed is Done” trade was a thing of the past but here were are again, rallying on the possibility that the Fed is done raising rates. Even though we have mentioned here that the Fed is Done raising rates, the market still needs to read the Update to get this vital information.

Tuesday the stock market decided to take another run at the recent highs and the NASDAQ Comp succeeded in breaking the high from a couple of weeks ago. The other averages were not quite as jubilant. They mostly just tried to get back to Monday’s high. The turnaround after the Fed minutes came out was almost breathtaking with the NASDAQ Comp, the happiest index on Tuesday, moving up about 30 points from low to high. Still, that really isn’t much of a rally given the place the indexes are trading.

This evening we would like to say that the market continues over bought and will have to succumb to selling soon. We are near the end of the month so there may be some position squaring going on but the bottom line is that no matter if the Fed is done or not, the market needs to go down over the next couple of months. Right now, it seems to be in denial if that is possible. The key reason for the complacency is that the players are not in the house, they are still on vacation—volume is light, although Tuesday’s volume was the highest in the last week, wow.

We had a notion that Monday’s highs might be the ultimate retracement but that was not to be today. There was a little more upside on Tuesday but we still believe that the right place to be is short or in cash.

In reading the media reports on the Fed’s minutes from their last meeting, we see references to the Fed being done “tightening”. The idea that what they have been doing is tightening seems to miss the mark of the incredible credit expansion that has taken place even during the “tightening” period. Tightening means that credit is more difficult to get and we certainly aren’t in that place.

We wait until Friday’s jobs’ report. See you tomorrow.

Dow Industrials: 11,369.94 +17.93
QQQQ: 38.73
RYVNX: 21.65
RYAIX: 24.11
RYCWX: 41.58
TLT: 87.64
BEGBX: 13.72