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Fed Minutes Throw Cold Water On S&P New Highs

ByMrTopStep
AuthorDanny Riley
Published 08/21/2014, 01:26 AM
Updated 05/14/2017, 06:45 AM

The market was inching up, but the S&P has a long history of waiting until everyone is sure it’s going to go one way and then going in the opposite direction. It’s always a test of nerves and of faith in your own analysis to trade the S&P. 

When the FOMC minutes came out, traders fixed their focus on remarks suggesting that the Fed may have to raise rates sooner rather than later. That was enough to keep the S&P from pushing above and closing above the previous high of 1985.25. 

But it sure did a great job of getting people’s hopes up before disappointing them. We still believe the trend is up and that the Fed and ECB are not in a position to raise rates any time soon. Europe, in particular, will not backtrack from the defining decision of Mario Draghi’s tenure, to lower rates to zero. Besides, doing so would create chaos in Europe just when they are trying to show unity and power in their confrontation of Vladimir Putin’s aggression. 

We expect the Jackson Hole symposium to include remarks by both Draghi and Janet Yellen that will calm the markets and lead to a rally. We expect that rally to take the market to 2008 in the S&P (the price, not the year), after which we expect some digestion and a possible pullback. 

HIGH: 1985.70 Recently
LOW: 1975.50 Early
LAST: 1984.00 UP 608 Handles
TOTAL VOLUME: 1mil minis; 1.3k bigs
MOC: BUY $400mil

FOR TOMORROW:

Jobless Claims
PMI Manufacturing Index Flash
Philly Fed
Existing home Sales
Leading Indicators
EIA Natural Gas Report
2-5-7yr Note Auctions

The S&P has a way of doing the opposite of what everyone expects it to do…

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