The SPX is at 2136 at 6:51 a.m. F. As I mentioned yesterday, I had exited my two equity position at 2147 yesterday for profit taking and risk management based on that 2150 level being a key resistance level based upon my theory. I continue to think that if it hits that buy zone that I mentioned between 2120 and 2130, I'd be interested in entering again, especially if it is near 2120. Edit: 1. It's 7:33 a.m. PST. The SPX is at 2134. It went to 2131. I'd like for it to be in that buy zone of 2120 to 2130 for me to be interested in entering Lot 1 2. 8:53 a.m. The SPX is at 2136. Just ranging between 2130 and 2140. Not that interesting. The price action has resolved itself such that this 2130 to 2140 level is not that interesting at all. Not at all. 3. 10:06 a.m. The SPX is at 2136. Just loitering around the 2130 to 2140 lobby. 4. 12:57 p.m. PST. 3 minutes left. The SPX is at 2139. A difficult day to think about trading for anything. It's in that hideous mid range.
Yeah, this continues to be a buy the dip market. We've made it 8 years with 1 rate hike and no problems...almost to the point of "do we need to raise rates?". It doesn't seem the bears are very strong, because to me it seemed like they could have pushed down the last couple weeks but didn't. Just waited for a catalyst. Which I infer means things aren't so bad now, since they're waiting for "the real bad news".
Another real possibility instead of a big crash is just a very long period of low growth and high inflation. Inflation has been stubbornly low these last eight years so it is hard to imagine it taking off anytime soon. I would disagree that we have made it eight years with no problems. Stress has been building under the surface from eight years of ZIRP and QE across the world. It's not visible on the surface, but when the monetary support is removed it could shake the very foundations of our economy and our markets.
I am sure the egg heads at the FED are asking the same question. ZIRP has worked so well with no consequences why don't we just leave rates here forever until inflation takes off. They will probably label zero interest rates the new normal for a new economy. It's this type of academic arrogance that has set the pieces in place for the next big fall.
As the SP500 is inching toward the oversold level on uncertainty of a rate hike next week, I think much of this drop is getting priced in and an over reaction. A quarter point should not move the needle but definitely good for the financials. We had a test of this a couple months ago when it looked likely and the markets actually went up. Should the rate hike happen and the markets pull back I think it will be short lived.
Hiking rate by a quarter point shouldn't be too big of an issue for the market as long as the FED doesn't indicate that they want to hike rates every quarter or so.
I don't believe its an issue of wether or when the Fed should hikes interest rates. Its been made so, but the true issue rests elsewhere. Its more along the lines of -- what will the interest rate path/trajectory look like for the next few years? If the Fed were to offer and stick to a plan, the market picture would improve. The Fed is tiptoeing along a fine line when setting market expectations. To me, that is the true issue. Too dovish and they'll send speculate the wrong way of the investment curve. Too hawkish and they'll risk short term pandemonium that further complicates the economic and market picture. The Yen another FX currencies are carrying a heavier weight on setting domestic monetary policy than most would think. The way I see it. The Fed has to raise interest rates, or at least show clear intent of raising interest rates to fend off buying in the Yen. A strong Yen dismantles every the BOJ has done to generate growth and investment. By cornering the bond market, central banks are now directly involved in FX market to a greater degree. Its hard to set monetary policy with such degree of variability.
Agreed that in the grand scheme of things, a quarter of point doesn't amount to a hell of beans in this world. However, this is mostly about perception and confidence, and the market is not equipped to deal with a rising interest rate environment. We got a preview last December what raising rates can do to this fragile market. At the time, just like now, experts argued that raising rates will be good for the market because they signal confidence by the FED in the economy. They were wrong. The FED quickly backed off and the market recovered.
The FED has to feed the monster they have created. I would like to think they will raise interest rates next week, but they have had so many chances and still here we are at near zero. Who knows maybe they will grow a pair and do something next week, but more likely they will continue to accommodate the market until inflation takes off and the decision to raise rates is taken out of their hands. If that happens, if the FED is forced to raise rates to combat inflation in a low growth environment, that world be the worse case scenario for the market.
What happens to your mortgage if inflation runs rampant? To put it another way, suppose prices of everything double in the next year and salaries double to catch up, do people in fixed rate .mortgages make out like bandits while renters suffer?
ive never owned a house, but from my understanding house prices have gotten so out of control because of low interest rates. if interest rates were higher, people wouldn't be able to stretch their money out as far so to speak.
