Jul 11

The Market Today 7/11/13: Move


What a move today in the market! All of us could thank Fed Chairman Ben Bernanke for today’s move. All this was sparked by the comments the Fed Chief made yesterday late afternoon, that stated the Fed would be acomodative until the data proves otherwise. The market obviously took this as the stimulus would NOT be ending as early as September, and that the Fed would not be raising interest rates either. As far as interest rates, I do not know why the market has thought that the Fed would be raising rates anytime soon. The Fed has never said, implied, or noted anywhere, that they were planning on raising rates soon. Nonetheless, the market had in it’s big head that this would be the case. The other concern would be that the Fed would begin to “taper” their bond purchasing as early as September. Both fear’s have been put to rest as of his comments yesterday afternoon. The move in the market today was very strong!! The S&P 500 was up about 1.4%, and the Dow 1.1%, and Nasdaq 1.6%!! Bonds also had a very strong move, and rallied hard. The yield on the 10 year Treasury was down approximately 10 basis points to 2.57%. Both, the move in the stock market, and that of the bond market, were very significant, and strongly bullish.

Move: Stocks

The June swoon sure did not last too long. From the market top, to bottom, we saw basically a 5% correction. If you looked at the financial headlines, it seemed as if the world was coming to an end. Not only were stocks moving lower, but bonds were as well. There seemed to be nowhere in the world to hide, and park your money safely. If you recall by looking at the graph from my last commentary a couple day’s ago, you can see, the chart, if the S&P 500 would have to move above 1,653. The next move should this happen, would be 1,689, another all time high! Look’s like this should happen in the short term. Now, let’s look at the chart above. I drew a trendline from the market low in April, to the high in June. I simply moved this same trendline, and started from the bottom, in June, to give us a prediction, or an indication, of where the market should move to next. According to this graph, we are looking at a price objective of 1,725. This is a sharp move to the upside, representing strong gains, thus warranting being long in the market at this time.

Move: Bonds

The bond market is where there was significant repurcussions in today’s move. Many trader’s were short bonds, due to the fact interest rates were moving sharply higher. As a reminder, bond prices moves inverse to that of rates. Since rates were moving higher, prices were moving lower. As I mentioned above, the market perception was that the “tapering” program was begin in September. Now that we see a reversal from the comments from the Fed Chief yesterday. These short positions were killed today. Again, interest rates went down about 10 basis points to about 2.57% on the 10 year. This move lower on rates should continue. From what the chart indicates, I see the rate moving to 2.44%, then 2.35%. For now, keep bond positions in tact for this move.

Author Sean Rhodes is an expert in financial markets and helping you manage your money. For a no-risk consultation, check out Sean at the following link for more information and expert advice on investing in equities and  helping clients navigate each market move.

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