Monday, a holiday in the US, I said to basically SELL given the rate hike outlook, and I’m moving to cash, Tuesday, you know what happened, all hell broke loose and stocks slid way down. Wednesday, I looked at that floor and thought that is way too low way too soon so I figured there will be a rebound (not even knowing the supposed progress on Greece). Anyway, I was nursing a cold and needed a rest, only to find that I was right about the rebound. So here I am, Thursday, battling a self-imposed embargo on trading. Mentally, I just can’t stay away. As it is my routine, I’d check the market news, as well as the prices of the stocks down to plotting Support and Resistance. The only thing I haven’t done is the “by the book” procedure which gets me unsettled because then I’d be reminded of the many things I have to do in moving house!
Anyway, I want to share to you that there is indication of a mild and tender end to May. After what looks like a pullback today (after the excitement of buying activity yesterday), we are getting the GDP reading tomorrow (Friday) and there is a -.8 consensus as tracked by Bloomberg. What that means is instead of growing, the economy is slowing. Not good in the usual swing of things, but with a rate hike on the line, the “bad news is good news” seems to dictate on the market. Let’s think about it for a second — with interest rate happening, it will boost the US dollar against the other major currencies, the US dollar is already making oil cheaper (a good thing), and letting people pay less for most imports (a good thing) thereby letting them build up savings or pay down debt (generally a good thing). That’s why the “bad news” is good news … we can stay in the sweet spot where we are now. Which means no interest rate hike.
The Fed officials though obviously want to raise rates. But if the world is still at its slow growth or no growth cycle — it may just not happen. The Greece thing is of course a distraction but who wants a crisis right now? I think the solution will come. So it looks like there will be wilder volatility if not unseasonably higher markets upon us, because the manufacturing / jobs / employment reports are out next week then we have the Fed June meeting. Don’t believe me, just watch.