One strong Jobs Report last Friday and it’s the end of the world, huh? That’s it, the Fed is going to raise rates and the market has topped. For those who don’t know me, I’m being sarcastic. Here are a few thoughts:
1) This week, you will hear non-stop discussions about the Fed. My best advice is don’t get brainwashed by the financial media. LEARN TO THINK ON YOUR OWN! If you are easily influenced, turn off Twitter and shut off the TV.
2) The Fed will NOT raise rates in their June meeting. In their March meeting, they will keep the word “patient” in their language and they will continue to be accommodative.
3) It wouldn’t surprise me if some Fed speakers come out this week with dovish comments to help soothe the markets.
4) Many think the market dropped on Friday (3/6) because the jobs report signals the economy is strong enough to handle a rate hike. Personally, I think it dropped because we had a strong run in February and it was an excuse to take profits. It was the market’s way of keeping the greedy people in check…that’s all!
5) The Fed doesn’t ONLY look at Jobs data. They look at GDP, Housing, Manufacturing, Wage Growth, etc. While these areas of the economy are improving, they are still not at levels where the Fed would like them to be. The Fed would rather be late in raising rates than possibly put a dent into what many still consider to be a fragile economy.
6) Technically, the market is still in a strong uptrend and Friday was the first real distribution day in over a month. No need to panic until we start seeing the big boys dumping more stock. Remember, I refer to the Nasdaq Composite as the market because it has always been the leading index of the 3 major averages. The S&P has lagged recently due to Energy, while the growth areas such as Biotech continue to act well. I discuss more technicals in my Weekend Video.
I realize that I could be dead wrong, but until I see more selling by the large institutions, I am sticking with this uptrend. It wouldn’t surprise me if we see a little more downside over the near-term, but again, that would be normal price action considering the strong gains in February. Good luck trading!
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