Stocks rallied off the morning lows only to take out the morning lows by early afternoon. The morning session the market looked great setting up an outside reversal day. Volume was running higher, but the rug was pulled out from underneath buyers until sellers were flushed out at 1:30. Released at 2pm the Federal Reserve’s Beige Book did not hint at any reason the Fed would begin to taper at the next Open Market meeting. We highly doubt the Fed will ever taper, but that is for a different discussion. This market is quite resilient and why it proves not to get caught up with the ebbs and flows of the market intraday. We remain in an uptrend and continue to stick with it.
The US 10 year Treasury note yield shot up above 2.8% today. It appears yields want to push back up and challenge 2013 high yields. One thing will be something to watch is how we react if the 10 year pushes above 3%. Anything is possible, but consensus appears to be a dire consequence if the 10 year yield heads above 3%. Higher yields have put the cap on Utilities making a move (you can track via XLU). In the end, price rules all and the price direction of yields is higher.
A few key events are coming for us to digest. Tomorrow we have the ECB and 3rd quarter GDP reading. In addition, the all important monthly non-farm payroll figures on Friday. Estimates for 3rd quarter GDP is at 3.1%. 3 percent is a pretty decent growth target, but will it spark sellers anticipating a Federal Reserve taper? Nothing is guaranteed, but given our current trend direction we can only assume this trend will continue higher.
The end of this week will certainly be interesting and we look forward to see what we get from the market. Anything is possible and while we’d love to sound “smart” and tell you what will happen, but the truth of the matter is no one knows. Certainly they will try and why they go on CNBC. We’ll avoid the nonsense and push forward with our trend following.
Ride those winners.
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