The Stock Market is hovering around the unchanged market this morning after the late Wedn plunge in the Stock market.
This time it was the Fed. They raised rates(which was expected) but their language was hawkish. That was not expected.
We have come a long way from Y2K when Greenspan flooded the markets with liquidity over a non-event.
Now, we so many events that could affect the economy seriously and the Fed seems to have its blinders on. I am not a conspiracy conspiracist, but what the Fed is doing now makes no sense.
To increase short-term borrowing costs when the U.S. debt is financed with short-term instruments seems more like suicide to me.
Not to mention, the trade situation where a stronger dollar is going to hurt U.S. exports at a time when a tariff fight is going on.
This feels so wrong to me, that my feeling is Powell should be fired today. But, this guy should have been vetted as to his views on monetary policy before he was put into this position.
Trump has no one to blame on this one but himself. If he wanted someone like Bernake he should have put someone like Bernake in that position. He has been getting some very bad advice for some of his appointments. Which is not surprising considering the Never Trump movement.
But it is what it is. So, as a trader, best to aware that the Fed is not going back to the easy money anytime soon. If Powell would have been around under Obama, we would still be in a recession.
One thing you need to start watching is recession indicators. So far, they are tame. But if they start showing some serious changes, you need to remember that the stock market does not do well in a recession.
The news today is the Senate hearing on the confirmation of Kavanaugh. The odds have increased to about 55% that Kavanaugh will be confirmed. Up from 40% yesterday.
I expect fireworks today. And I expect the Senate to present a good argument that they should be disbanded. So far, they have shown how useless they are in many other matters. But this one highlights the fact that the country can do much better without the Senate as it exists now.
Until you have term limits, restrictions on special interest money and 2-year terms for Senators nothing is going to change.
In addition, the confirmation process rules need to be changed where events like what we are seeing here can never happen. 11th-hour accusations should not be given any consideration, period.
Simple logic applied by the lawmakers would solve a lot of these problems. That is where the problem is. When you have ideologues who are corrupt logic is not even considered.
As I see it the Kavanaugh confirmation is a test for the Republican party. If they fail this test, their base will never forgive them. That is why an up and down vote is essential. At least that will diminish the fallout for the innocent souls that have some concept of fairness.
It is also a test of our institutions If 11th-hour allegations, that are unsubstantiated, 35+ years ago that our government is so broke it cannot be fixed.
I have gone into detail on this as my feeling this is going to have an effect on the Stock Market. If Kavanaugh goes down, you may well see a sharp drop in the stock market. If Kavanaugh gets confirmed, the stock market rallies.
Let’s see how close I come to this:)
Also, let me give you my usual caveat. I am neither a Democrat or a Republican. When the Republican went after Clinton I was very vocal in my criticism of the Republicans. They went too far in my opinion.
I apply my views equally to both parties. I find myself more of a libertarian every day. Not a fake one that picks their issues, but one that really believes that fairness and laws should be applied equally.
If you are wanting to trade the Kavanaugh trade, I would watch the odds. Right now it is around 52% that Kavanaugh will be confirmed. If that number plunges to the low 40s or much lower. I would do a short-term hedge before the vote.
The stock market is oversold at this point. I almost pulled the trigger on a mean reversion trade in SPY before the close yesterday. If we move lower from here I will almost certainly start a 1/4 position long SPY. My position sizes are $50,000 each. However, I do the trade via SSO so the trade is $25000 but it is a 2x leverage.
If you want to follow some of my trades along with my thoughts typically given after the open you can go to @rickjswings. Typically I talk about the overall day expected with the markets and also give some levels on the ES and NQ for failed breakout scalping.
It’s my private twitter feed for the stock market and its free. Sports Handicapping is the subscription-based part of this site. But considering the cost of joining it’s almost free:)
Good Luck Today
RickJ
RickJ’s Handicapping Picks
https://rickjshandicappingpicks.com/investing
Skype: Ricca
