17 Oct Investors Await Fed Minute Release
The stock market volatility is in full force once again this morning, with stock prices currently down sharply in early morning trading. Since this is following one of the strongest single days in recent months, that isn’t a big surprise. In fact, stock prices came within a stone’s throw of hitting their 100-day moving average, which we identified in yesterday’s update as being the next ceiling of resistance. From a technical perspective, we can lose up to 50% of the recent day’s gains and still be amid a strong drive higher. If we lose 50% of this level, we can expect prices to recover and take another jump higher. Therefore, don’t look for today’s stock slump to last.
Investors are awaiting today’s meeting minutes from the most recent Fed meeting to see if there is any new data released that could impact the market’s current expectation of future rate hikes. With President Trump stepping up his opposition to the “gradual hike” plan, it will be interesting to see if this deters the Fed’s path. Personally, I don’t expect to see the Fed bow down to the President, as they are sworn to not be influenced by a political agenda. We will have to see if this is in fact the case.
Although mortgage bonds are doing well currently, I foresee stocks turning higher once they have lost 50% of the recent gains. This will likely add downward pressure to mortgage bond pricing, which will put upward pressure on interest rates. Therefore, we will maintain a locking bias.