From the Trading Desk

Yellen’s Testimony Boosts Stocks

Yellen’s statement on interest rates was credited with pushing the market higher during today’s session. Volume was higher across the board as the Dow hit another all-time high. We saw the NASDAQ retake its 50-day moving average yesterday and buyers pushing it higher today. Small caps lagged after leading yesterday’s market. It was a little disappointing seeing the index close off its highs. Still, we have a bullish move in the market today and it is hard to complain too much with the price action. Bears jumped all over the mid-day fade, but have a hard time grasping this market continues to defy the odds. In time, we will see a correction, but for now this market looks like it wants to continue to push higher.

The Fed is going to continue to gradually raise interest rates and it should not come as a surprise. Evidently, this market was expecting something different and the market jumped on the news. We certainly recognize this rally is long in the tooth, but there isn’t much we can do about it. If the market rallies another 10-15% from here are we going to miss it? There is no way we want to miss out on gains. There is always a possibility we may be wrong, but it is precisely why we have our stops in place. They will protect our downside in case we are wrong. For the time being, we are going to continue to operate on the long side of the market and will be prepared for whatever the market wants to throw at us.

There are quite a few market participants trying far too hard to pick a top. What is the point of being wrong all the time just to be right once? Even a stopped clock is right twice a day. We much prefer to stick with the trend and watch our stocks carefully. This market has had a lot thrown at it and we have seen this market find support and move higher. Perhaps when the fed begins to gradually reduce the size of its balance sheet and raise rates gradually enough we see some resemblance of a correction. We are not going to guess when this might occur. It may start tomorrow, next week, next month, or who knows when. If we have our stops on the books and proper position sizing we can handle anything the market throws at us. Let’s leave the guesswork to the pundits and focus on what really matters.

Three days down and two to go. We hope you are having a great week.

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