The Federal Reserve minutes show a more hawkish Fed than many saw at the committee’s last meeting. Earlier in the day the NYSE was having issues and therefore not publishing volume data. A few stocks were put on ice, but for the most part it was more a thorn on our side not seeing volume run rates throughout the day. Financials were a big winner on the session, but their gains were prior to the release of the meeting minutes. Whether or not someone knew something prior to the release is irrelevant to us.
Higher rates are good for banks and with higher rates come with better spreads for banks to make money. Post release the dollar jumped higher as the US Dollar Index jumped back above the 95 level as the EURUSD cross rate fell below its 50 day moving average. It will be interesting to see how the market reacts to rates potentially normalizing. Just a day ago many felt rates weren’t moving from where they stand now. We still remain on shaky ground and will certainly need to see buyers jump in and push this market higher.
The big banks like BAC, JPM, and GS enjoyed nice gains. Pay close attention to Regional banks displaying superior price strength and breaking out from sound patterns. You may even look to FAS to give you an added boost. The one thing to remember is proper position sizing and reasonable exits will help keep risk in check. There is no need to go “all-in” and risk far too much and risk blowing up your portfolio.
Keep an eye on the dollar as a stronger dollar will put pressure on commodities. Crude Oil fell from its highs today and given the strength in the dollar it will be interesting how the commodity will react. It is still in an uptrend, but may have trouble with a stronger dollar. Summer driving season is here and is always a factor for fundamentalists. For now, the attention appears to be turning to financials and away from utilities and other winning sectors.
MGT finally failed today. The break just before 11am was a great time to short the stock. Whether or not MGT goes the way of KBIO remains to be seen. However, given the gigantic run its had a collapse to where it started really would not be surprising. Let’s see how this plays out and react accordingly.
What a fun week already. It is a shame we are on the backside of the week now. Stay nimble and as always cut those losses.
