The defining moment of the week for the U.S. Dollar came as the first press conference of the President-elect Donald Trump unfolded. Few details on topics the market cared like infrastructure spending or fiscal stimulus were shared while the most combative aspects of his campaign were in full view.
What does it all mean? One of two things is likely to happen because something important is about to happen because markets don’t line up like this every day. Either we are about to create a super bubble or it needs to drop right here. In a crazy market like this you can’t automatically assume anything; you can’t impose your will on the market. The higher probability should be a pullback.
The markets picked up where they left off last year. The release of the FOMC minutes from the December meeting and President-elect Trump's tweets impacted prices and almost overshadowed the release of the biggest economic indicator: the non-farm payroll report. The U.S. Federal Reserve published the minutes from its December meeting.
The market is going to skyrocket; the market is going down the drain. It’s the time of year when all the pundits make the predictions for they see in the tea leaves. For my part, I’m surprised it was able to recover and negate last year’s January effect. I think this year will bring us neither. I go back to Fed guidance for three rate hikes this year. How many times they hike rates is irrelevant.
The year 2016 has been quite phenomenal for the financial markets as repeatedly unforeseen events sparked frightening levels of volatility across the board. The year started on a shaky footing in January with fears of slowing global economic growth, sending global stocks into an official bear market by February.
The Santa season is over. We now head into the final light volume week of the year. The other morning Fox Business news contributor Stuart Varney was bemoaning the fact the Dow was absolutely flat. You see, Varney was rooting for the Dow to hit 20,000 while his show was on the air. I suppose he has a secret batch of milk and cookies as well. Early last week on Tuesday, the Dow came within a handful of points of getting the job done. We all know a market can move 10, 50 or 100 in the blink of an eye if it wants.
So, they got the Fed, now they’ll get the strange attractor. We have two days to go to get to the seasonal change point. It’s a strange year, not only because of the election ( you knew I was kidding) but because Christmas hits on a Sunday this year. That means we are still a full week shy and perhaps we don’t get the lighter Christmas volume that is characteristic of this time of year until the latter part of the week.
The Bank of Japan will release its Monetary policy statement and press conference between the end of Monday and the beginning of Tuesday Dec. 20. Analysts are expecting the central bank to keep the quantitative easing unchanged and negative rates on hold. The weak Japanese yen and hawkish U.S. growth expectations have given the BOJ room to hold and even improve its economy assessment.
In my report to clients on Tuesday night many stocks seemed to have turned the corner from the recent sandwich pullback and I said it could be the start of the Santa rally. I’m not a rocket scientist. I merely asked myself a simple question. If not now, then when?