Posted by Pete Stolcers on March 19
Posted 9:30 AM ET – The market continues to grind higher ahead of a fairly predictable FOMC statement. Fed officials have been vocal the last month and the comments have been dovish. Central banks are trying to avoid a recession and they have been easing. The news is light this week and that favors the upward momentum.
Theresa May was prevented from having a vote. Parliament said that there weren’t enough material changes to the last plan to warrant another one. Now she will go to the EU and ask them for a 9 to 12 months extension.
The Trump/Xi summit has been postponed until June. That tells me that there are still major negotiations ahead. The tone is cooling and China’s friend (North Korea) is rattling its sabers. I’m sure that this is all part of China’s trade negotiation strategy. It will use whatever leverage it can.
Global economic conditions continue to deteriorate and the market is turning a blind eye to it. As long as central banks are easing and as long as the deceleration stays abroad, investors don’t care.
Swing traders should patiently wait on the sidelines. I still believe that the market is pricing in the best possible outcomes for pending issues. Any surprise favors the downside. If global economic conditions improve, I will buy. Until then, I need to see that loose monetary policy is sparking growth. That has not happened to this point. The PBOC has eased 5 times in the last year and they continue to reduce bank reserve requirements. China’s economic growth continues to deteriorate. Japan and Taiwan have also been reporting soft numbers. Europe is in bad shape. The ECB is out of bullets and their only recourse is to postpone future rate hikes. Their ZRIP (zero rate interest policy) has them painted into a corner. The market won’t care about the global undertow… until it does.
Day traders can ride the wave. As long as we stay above the high from yesterday, favor the long side. Intraday volatility has been extremely low. We are likely to stay inside of the first hour range. Buy dips.
Traders will wait for the FOMC and it won’t spark much of a reaction. Then we will go into a holding pattern until the next news release. I’m expecting price compression during this news vacuum.
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