Last week saw some volatile action; in part because the European Central Bank cut its deposit rate a bit more and then extended its quantitative easing program into March of 2017 and maybe beyond. But markets had anticipated a deeper cut to interest rates (which remained unchanged) and an increase in its monthly asset purchase program were considered a disappointment by traders and that sent shock waves though the bond market. It also had a large impact on some currencies as the dollar fell hard while the euro spiked higher.
While the ECB is moving in one direction, our own monetary policy appears to be headed in a different direction as Fed officials here are strongly hinting at a rate hike coming at the next FOMC meeting. The announcement will come the week after next on Wednesday, December 16th. With seasonality now getting more positive and the indexes still showing modest returns for the year, I would think the market would rally at some point this month to boost the end-of-year gains. That doesn't have to happen of course, but the narrative is that our economy is looking stronger and indexes like the S&P 500 are used as a barometer of sorts to support that narrative.
The S&P 500 took a tumble mid-week last week and tested that lower support line (successfully). Thursday's losses were completely erased as were some of Wednesday's losses, but the index closed the week with only a modest 0.13% gain overall. There is some trend line resistance overhead. Volume was higher than average on Thursday's sell-off as well as Friday's rally. It is likely that the Fed will try to keep some support under price with liquidity injections, which are net neutral right now. But this market is looking past the holiday season and there may be storm clouds out on the horizon. Nothing should be taken for granted in a global economy that is sending mixed messages. While I am a bull this month, I am willing to take off my horns if market conditions change.
While the ECB is moving in one direction, our own monetary policy appears to be headed in a different direction as Fed officials here are strongly hinting at a rate hike coming at the next FOMC meeting. The announcement will come the week after next on Wednesday, December 16th. With seasonality now getting more positive and the indexes still showing modest returns for the year, I would think the market would rally at some point this month to boost the end-of-year gains. That doesn't have to happen of course, but the narrative is that our economy is looking stronger and indexes like the S&P 500 are used as a barometer of sorts to support that narrative.
The S&P 500 took a tumble mid-week last week and tested that lower support line (successfully). Thursday's losses were completely erased as were some of Wednesday's losses, but the index closed the week with only a modest 0.13% gain overall. There is some trend line resistance overhead. Volume was higher than average on Thursday's sell-off as well as Friday's rally. It is likely that the Fed will try to keep some support under price with liquidity injections, which are net neutral right now. But this market is looking past the holiday season and there may be storm clouds out on the horizon. Nothing should be taken for granted in a global economy that is sending mixed messages. While I am a bull this month, I am willing to take off my horns if market conditions change.
