Sunday evening newswires were hit with news Larry Summers had withdrawn from consideration for the Fed Chair position. Futures jumped at the opening Sunday evening hoping a more dovish Fed Chair would be nominated. For the NASDAQ it wouldn’t last long as AAPL lead the NASDAQ lower from the beginning of the day to the end. On the other hand, the Dow Jones Industrial average was able to hold onto the majority of its gains despite the selling across the market. Volume expanded quite a bit from Friday’s levels, but the NASDAQ was able to escape a distribution day. Today’s market action was not the best of ways to start a week, but one day doesn’t make a trend.
Big story lines will hit the market this week including the FOMC rate announcement expected to hit the market at 2pm EST on Wednesday. Many are expecting the Fed to “test” the waters with a taper of 10-15 billion in Treasury bills. Today’s actions in the debt markets showcase yields are hinting at moving higher. How high is unknown, but it has been quite awhile since we have seen the 10 year Treasury bill at 3%. The price action in treasuries remains bearish for prices and bullish for yields.
Higher yields will likely put further pressure on Housing Prices as buyers will have to deal with lower purchasing power. However, if the number of cash purchases remains high it may not matter. How to deal with this if you trade homebuilders? Simple, using a trend following method allows you to ignore the nonsense of figuring out where prices will be or should be. It just is with price and having a sound process to identify a possible trend is a prudent way to tackle the market. Big Wave Trading can help.
To add to the nonsense we have option expiry this week. Volume should tick higher and throw in the Fed we should have an exciting week. Stick to the plan.
