From the Trading Desk

Volume cools after Friday’s Quadruple Witching; Stocks continue Tight Trading Range

We continue to see tight consolidation across the board as the market continues to digest the gains we have seen in January and February. February was a huge month for the market as a whole and we have needed the market to cool in order to sustain these gains. This market continues to produce buyable patterns and despite the market going sideways. At some point it will be nice to see the market break away from the current trading pattern. However, we must not rush this market nor rush into the market buying stocks in a lackluster manner. Stay disciplined in your approach by sticking to your money management rules and signals. Do not under any circumstance take unnecessary risks with your hard earned capital. Let’s allow this market to play itself out and we will simply ride the wave. Stick with the game plan!

Bonds rallied today sending yields lower as bonds continue to inch higher after the Fed’s latest move to raise interest rates. Odds favor another rate hike in September, but have come down ever so slightly. Immediately following the rate hike odds were in favor of a July hike (July 26th, 2017 meeting), but have been pushed back to the September 20th meeting. An interesting development was the action in the two most interest rate sensitive sectors in the S&P 500: Utilities and Financials. Both were lower on the session and while you would suspect Financials moving lower along with bond yields, but utilities you’d expect to move higher. Not the case today. There are some regional banks still looking decent and have solid fundamental growth. However, the same cannot be said regarding the utilities. Price action is all that matters and we’ll continue to see how price action develops in financials.

Crude oil fell on the session. It appears US Shale producers are picking up the slack OPEC has left behind after their agreed production cuts. The commodity was struggling to muster any momentum in the mid-50s and now is trying to save itself from moving into the mid-40s. Of course, for the US consumer lower oil helps and we certainly do not mind the commodity helping out the ordinary American. For what it is worth, Cocoa seems to have bottomed and is building some momentum to begin a new uptrend.

Not a bad way to start the week, but we are looking for this market to do build upon the positive action we have seen in individual names. If this uptrend is to end we’ll have our exit strategy in place and move on. Our damage will be limited due to our position sizes and exits. Everything else is simply noise. We hope you have a great week trading!

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