We’ve made it to the final week of the campaign. I don’t know if we are going to get a black swan out of this but we are certainly having our October surprise. What I can tell you is what I’ve been telling you. I think everyone is having election fatigue. It shows in the charts. It really hit home on Friday when the news broke the FBI reopened the Clinton case. My 1-min YM chart sank like a rock.
So it was another week, another attempt lower for the bears. What was the justification? In the Nasdaq it was 60 weeks up off its August 2015 low. For the rest, there was a lesser pivot to end the rally early last November and a lot of these names turned in a 233-day window.
The jobs number came in light at 156,000. This benefits the incumbent party because the number wasn’t good enough to invoke interest rate hike fears. It wasn’t bad enough for the market to tank. But all the other factors are still out there, including Deutsche Bank and now the rhetoric concerning a conflict with Russia is heating up.
Financials markets may have found their black swan and it had nothing to do with Donald Trump, Hillary Clinton or any of the usual controversies we’ve speculated on over the months. No, the Germans may have their own Lehman moment coming just around the corner with Deutsche Bank. A zerohedge.com story says Merkel cannot politically afford to bail out the troubled bank.
They chickened out; I knew they would. You need to understand how predictable the Fed is because they’ve been playing this same game for months now. It’s good cop/bad cop with the various Fed chieftains making various speeches about how they need to raise rates at the next meeting. Then they never do, do they?
This is the week we’ve all been waiting for. This is where the Fed meets the seasonal change point. For those of you that don’t know or didn’t quite realize it, all financial markets tend to change direction at or very close to the change of the season. Throw in a Fed meeting and it becomes more interesting. Throw in a Fed meeting in the traditional graveyard for stocks (September) and it becomes even juicer. Add a presidential election and it could be a September to remember.
Is the Fed really getting predictable or am I just getting cynical? Its probably a little of both. It was about a dozen years ago when my wife really started worrying about me. Remember back in the day when CNBC used to show that little clip of the Fed Chair Alan Greenspan walking to his office and they always tuned into his briefcase?
Once again Fed Chair Janet Yellen did her best Alan Greenspan imitation and wouldn’t commit to anything while Vice Chairman Stanley Fischer sounded like he wanted to be sure the stock market doesn’t become too euphoric. The crowd interpreted all this the way they will, but for me nothing has changed. It’s still a case of “good cop, bad cop” and they are leaving all their options on the table.
In a speech last week, New York Fed Chief William Dudley said they could raise rates as soon as September. After all, the jobs report was so good how could they resist? Well, that was Tuesday and the markets didn’t like it. But the rest of the week was more or less flat because we’ve all seen the Fed’s various chiefs play bad cop to Fed Chair Janet Yellen’s good cop every 6 weeks or so.