From the Trading Desk

Fed Raises Rates; Dow Shines as NASDAQ Fades

Once again, the Federal Reserve has raised interest rates as expected by another 25 basis points. The announcement came at 2pm eastern daylight savings time. Odds were in favor of a June or July rate hike and the central bank decided to go forth with another quarter point hike. Far and away the best performing index was the Dow Jones Industrial Average while sellers spent most of their efforts in small caps and NASDAQ listed names. The NASDAQ continues to hold Monday’s low, but there is certainly a shift in sentiment and perhaps rotation out of large cap tech. Not a terrible session by any stretch, but the distribution showing up on the NASDAQ is raising the caution flag. We will stay vigilant with our stops and continue to exercise discipline in our trading.

The kick save close was something the NASDAQ needed badly. Had it not been for the close today’s session would have been much worse for the NASDAQ. AAPL continues to be a big weight around the NASDAQ’s neck and has weighed it down. It will take some time for the stock to repair the damage we have seen. It would not even surprise us to see the stock move towards its 200-day moving average. Most other leading type stocks like TSLA and BABA are holding up well and suggest this uptrend may have another leg in it. All we can do is sit back and react to what is given us. If we are to roll over we have our stops to protect our downside. Otherwise, we will continue to ride our stocks until they signal it is time to sell out.

At some point, it would be nice to see this market have some resemblance of a correction. It may not even happen this year, but at some point, in the future near or far we will have a proper stock market correction. Valuations are above and in some cases well above the norm. While we have yet to reach peak 2000 with earnings ratios we have with price-to-sales. One caveat may be there were listed stocks in the late 90s without revenue, but had high stock prices skewing the metric. All we know is we are elevated in terms of valuation, but what other alternative is there to stocks? Are you about to invest in a 10-year treasury note yielding 2.12%? As we always say price will dictate our actions. It is best to continue with what we have going and let the market do whatever it wants to do.

Keep those losses small!

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