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Since worldwide equity markets have long since dispatched the importance of silliness like products, revenues, earnings, and growth – – all in favor of the endless largesse of fiat-printing central banks – – all eyes were on Mario Draghi this morning (which, if you’ve seen the man’s face, is unfortunate for all observers).
To the delight of equity bulls, Draghi is the same amoral, spineless bureaucratic creep that Jerome Powell is, so he has once again grabbed his ankles and went Full Dove. ES and NQ markets vaulted green, with the NQ in particular soaring a full 50 points above its overnight low. As of this immediate moment, ES and NQ have returned to red. I find this fascinating, similar to the way in which Trump’s declaration last night that (groan) Trade Talks Are Going Well was meant with a worldwide eye-roll.
The upcoming week is loaded with potentially significant directional markets catalysts such as earnings from mega-cap industrial names like CAT, BA, and XOM, as well as from technology powerhouses AAPL, FB, AMZN, AMD, and QCOM. At the end of the week, the BLS is scheduled to release the December Employment Report.
To my mind, though, the most consequential potential market-moving “events” will occur Wednesday afternoon starting at 2 PM ET, when the FOMC releases its next policy statement, and at 2:30 PM ET, when Fed Chairman Powell addresses reporters at the post-meeting press conference. The Fed will clearly have Apple Inc. (AAPL)’s earnings news from Tuesday after the bell on its mind.
A ‘wild card’ segment has been added to NFTRH reports because I
wanted the freedom to go out of bounds in any direction, beyond our
usual areas of disciplined coverage. Last week it was a look at the
This week it is Fed policy with a side trip down memory lane,
trying once again to illustrate why today is not at all like the ZIRP
era and why the post-2015 re-connect between the Fed Funds rate and the stock market does not bode well for stocks, assuming the Fed really is going soft.
Excerpted from tomorrow’s edition of Notes From the Rabbit Hole, which will also include loads of actionable analysis along with the more theoretical stuff below…
My article last week, “Tale of the S&P 500 Tailwind,” came on the heels of the Emini S&P 500 (ES)’s rally of 100.75 points (4.1%) off the 2019 low and 53.25 points (+2.1%) above the Christmas week close. On its face, the advance was impressive, but recall that I qualified my enthusiasm, stating the following:
“In the aftermath of the Christmas Upside Reversal, last week ES (e-Mini March S&P) traversed a range from 2438.50 to 2539.25… and ALL OF IT occurred on Friday (1/04/19) after Jay Powell acquiesced to the wounded easy money masses, appearing to become a kinder, gentler, and more investor-sensitive Fed Chairman.”
On the morning of Wednesday December 26, the first trading day after the Christmas Day holiday, the ES (e-mini March S&P 500)) plunged to a new three-month corrective low at 2316.75, a full 21.4% beneath its September 21 high. In the hours thereafter, ES reversed strongly to the upside, from an acute oversold condition, and with a bit of prompting from the POTUS.
In my closing commentary in our member room at MPTrader.com, I wrote::
One of the most disturbing scenes in the series Breaking Bad was when
Todd shoots and kills a boy on a dirt bike after he witnessed
Heisenberg, Jesse and Todd heist 900 gallons of methylamine. Jesse: “Todd, that Opie Dead Eyed piece of shit…”
That is similar to the feeling I got after the Fed hiked the funds
rate as expected, but then declined to offer the stock market much
relief for its ongoing temper tantrum.