Overseas markets were lower as European banks continued their slide and the weakness carried over to the US. Selling was not overwhelming as volume remained below average. Utilities were the weakest sector in the S&P 500 followed by financials. The 10 year ended the day under 1.72% as bonds continued their rally as a dovish fed has sent buyers into long bonds. Volume was up on the session after Monday’s light volume affair. Today’s action was anything but ideal. However, we did need to pullback and consolidate these gains. Some caution should be exercised here. We don’t see overwhelming evidence we have a new downtrend beginning. It is prudent to remain cautious as we proceed forward.
Wednesday we will get the release of the FOMC meetings minutes from last month. Yellen’s comments as of late have been quite dovish. Other Fed Presidents have not been as dovish and continue to talk about potential hikes in rates. What will the minutes reveal? It really does not matter what they actually say, but how this market reacts to the event. Focus on the price action not what the Fed has to say about what it will do with rates in the future.
Two key events happening this month is certainly earnings season as well as the oil producers meeting. Both should have an impact on stocks. Expect volatility to begin to increase as we see earnings reports flood the market. We will be mindful of earnings releases and look for potential straddles. Heading into an earnings release it is best to have a pretty good cushion in the stock. All too often we see a great performing stock many are late in only to get crushed by an earnings release. Proper position sizing and exits will certainly assist during earnings season.
Let’s see how this market deals with earnings and into the oil producers meeting. Should be a fun month!
