Daily Market Brief

Pale Rider

Pale RiderWell here we are. Just 2 weeks after Yellen’s Monday morning “most dovish” speech which helped equity markets save a meager first quarter. Markets have corrected sizably in some indices since then and guess what? She’s baaaaaaack! The pale rider is riding to town twice this week (including a speech Tuesday morning pre-market) and could possibly exact vengeance on sellers of this market.

It is a reading of the recent Fed minutes which certainly highlights the fact that the FOMC does not want to disturb market forces:

Many participants noted that market expectations of the future course of the federal funds rate were currently reasonably well aligned with those of policymakers, and that a sizable change to the forward guidance could disturb this alignment.

So they keep riding a fine balance, not wanting to disturb markets, yet they are clearly keeping their eye on some dark clouds on the horizon:

However, several participants mentioned trends that, if continued, could become a concern from the perspective of financial stability. A couple of participants pointed to the decline in credit spreads to relatively low levels by historical standards; one of these participants noted the risk of either a sharp rise in spreads, which could have negative repercussions for aggregate demand, or a continuation of the decline in spreads, which could undermine financial stability over time. One participant voiced concern about high levels of margin debt and of equity market valuations as well as a notable shift into commodity investments. Another participant stressed the growth in consumer credit to less creditworthy households.

So here we are on the Monday that aligns calendar wise with the low reading of the $NDX 2000 fractal and $TICK readings that are commensurate with previous market low readings. In fact, the monthly reading is currently showing record low territory:

Monthly $TICK

Now granted the month is not concluded yet so such a reading can certainly correct itself before month end, but it speaks to risk/reward and a trade plan and knowing your levels is critical. Our battle plan is ready. Have you prepared one?

Cause the pale rider is asking a question: Shorts do you feel lucky? Well do you?

Yellen shorts



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