Interesting Fed Minutes....Strange Market Continues.....
Jack Steiman | May 21, 2015 12:45AM ET
The market was doing its usual meandering today. Slight positive bias overall but grinding as it has been when those important Fed minutes came out with two hours remaining in the day. The news was interesting. The Fed said that a rate hike in June was doubtful. Not a guarantee no but doubtful. The bigger message there being a rate hike will likely occur before years end. It was the Feds way of preparing the market for a hike. The market doesn't care as long as a hike isn't met with another hike shortly thereafter, and then another after that in the not too distant future. The market has understood that at some point the news on the economy will be decent enough for a hike.
The words out of the mouth of the Fed let everyone know we're not too far from a hike but really, like I just said, the market is fine with that. The market started to slowly move higher as the day went along only to see those gains vanish at the very end of the day, mostly because as we double topped for the day the sixty-minute short-term charts flashed a negative divergence. The unwinding off that double top has begun, and, thus far, is unwinding in a positive way, although it could use more selling before trying higher again. We have unwound enough to try higher but the oscillators are situated in a way that suggests a bit more selling which would actually be more bullish. We shall see what the market has to offer up, but today wasn't bearish even though the grinding action, sadly, continued.
Let's talk about the transports since that's what the bears are holding on to here. Even the bulls are talking about the lack of positive behavior in this part of the market. Old timers like to talk about market confirmation existing only when the transports make new highs along with the Dow. It's a myth folks. It hasn't many times in the past, and it has many times in the past. That can be said for just about every key sector we watch every day in the market. This particular market has been doing just fine with the transports lagging for quite some time.
At first it was the railroad part of the transports that were hurting things, but today we saw the airlines get absolutely crushed, and that was the reason for the transports breaking down out of a bear flag. Not good action there, but there are plenty of good areas still moving along. At some point the market will take a big hit and many will wrongly say, you see, those transports. Sorry. No sale there. The myth should be understood, and, thus, worrying about the transports controlling the market should be put in its proper place. It has little affect. It can help short term. It can hurt short term but it does not control the bigger picture.
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There are the usual headaches still lurking out there. Bad weekly and monthly charts and froth. The bull-bear back up to 34.8%. A very bad number. However, I will say it's good to see high put call readings on Monday and Tuesday. Things are often different between what people say they're doing or thinking versus what the end up actually doing. Good to see solid pessimism for two straight days. Today was neutral. I am troubled admittedly by the grind at the breakout instead of a blast up and out. Breakout's should be accompanied by high volume and a blast in price. We're not getting it.
Hopefully, once this pullback passes and things reset we can see that blast up and out, but, for now, we take it one day at a time. Buying weakness in individual stocks along with the market is the best way to go about things for now until this market stops grinding and instead starts to impulse up.
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