With a full week of trading, wavering and waging on when the US Federal Reserve Board might raise rates, equity markets seemed to have regained some momentum.
Charts Courtesy of Yahoo Finance.
Questions have changed from when and if the US FOMC will raise rates this year to simply when. With the last employment report being such a disappointment the “if” part of that question has come back to life.
The answer to the question can be debated back and forth until something actually happens with US interest rates. However, what is more apparent is that the market is quick to reward the status quo. The equity markets dislike uncertainty and a continuation of low interest rates in the US keeps the rules of the game the same for that much longer. With the type of bull market run, even in the past year, the setup of the game has brought tremendous rewards for those investors holding long positions in anything not related to conservative investing. See the graphic below:
Once the market woke up last Monday, the race to the top began. While there were some dips along the way, there was no denying the tone of the market. The sector rotation was predominantly positive with the exception of the home builders.
This week is full of data regarding central bank action and should give some insight to the thoughts of those controlling the money supply. Remember, that money has been made available to large institutions in a historically transparent manner. The markets, coupled with investment and economic activity has had steady parameters to work with. Let’s see what happens if the large institutions start to behave differently once those parameters begin to change. The data releases for this week include:
Monday – US Monthly Budget Statement, UK Retail Sales Monitor; Tuesday – German Wholesale Price Index, UK Consumer Price Index, Euro-zone Industrial Production, US Retail Sales; Wednesday – Japan Industrial Production, Bank of Japan Governor Speech, Euro-zone Trade Balance, European Central Bank Rate Policy and Monetary Policy Decision, US Capacity Utilization, US Industrial Production, US Housing Market Index, Royal Bank of Canada Interest Rate and Monetary Policy Decision, US Fed Beige Book, Japan Foreign Investment in Japanese Stocks; Thursday – Australian Unemployment Report, US Housing Starts and Building Permits, US Weekly Jobless Claims, US Philadelphia Fed Manufacturing Survey; Friday – Swiss Retail Sales, UK Average Earnings, Euro-zone Consumer Price Index, US Consumer Price Index, Canadian Consumer Price Index
Likely ranges for some popular ETFs this week may be:
| ETF Ranges for Week Ending April 17, 2015 | |||
| Ticker | Ticker Name | Lower Range | Upper Range |
| SPY | S&P 500 ETF | $206.30 | $213.90 |
| QQQ | NASDAQ-100 ETF | $106.00 | $110.50 |
| IWM | Russel 2000 ETF | $122.80 | $128.80 |
| TLT | 20+ Year US Treasury ETF | $127.20 | $132.30 |
| USO | US Oil ETF | $17.80 | $19.00 |
| GLD | Gold ETF | $112.80 | $118.50 |
Certainty in the behavior of central banks and to a larger extent, trends in the market, give rise to consistent rules of the market game. Success comes from being able to adapt to new rules, and more so if you can recognize when the rules are changing.
Good luck and trade rationally.