Hi Everyone,
The markets are still waiting for the Main Event, but it seems we have a little longer to wait. President Donald Trump’s congressional address is set to take place much later this evening at 2 AM GMT.
Before that, we have a wide range of other potentially market moving events like US consumer confidence, GDP, and Chinese Manufacturing data, all of which could provide The Perfect Storm for the speech.
Though it will be interesting to hear more details of the Trumpinator’s “great plan” to improve healthcare and boost military spending, I’m not sure if it’s worth staying up to watch him speak. Definitely, check your exposure, stops, and limits before going to bed tonight because that Trumpinator is out there. It can’t be reasoned with, it can’t be bargained with, and it doesn’t feel pity or remorse or fear, and absolutely will not stop.
For you die-hards out there who want to see some action, it’s very likely you’ll get it tonight.
With all of these old movie references included here like Clockwork Orange you glad I’m stopping now?
-Mati
Today’s Highlights
- Play that Same Old Record
- The Fed March is on
- Buck Gets a Boost
Please note: All data, figures & graphs are valid as of February 28th. All trading carries risk. Only risk capital you’re prepared to lose.
Market Overview
The stock markets continue to defy gravity as logic and valuation fly out the window. The Asian markets tried to decline yesterday but the US just brought them right back up again.
It should be noted though, that even though we’re seeing new record highs every day the gains are not very big. Yesterday the Dow Jones closed its 12th straight record high but with a gain of only 15 points for the day for a rise of 0.08%.
Now, I’m not predicting a crash and certainly wouldn’t want that to happen, just know that as far as investment cycles are concerned, stocks generally tend to rise gradually but when they do fall, they tend to do so suddenly.
Fed Voyeurs Delight
Those who like watching the Fed got a treat yesterday during Robert Kaplan’s speech. The President of the Dallas Fed said that we could see a rate rise in the “near future.”
The term ‘near future’ is a much stronger than the words ‘relatively soon’ that we saw in the January meeting minutes, which were released last week.
Following Kaplan, the market probability of a rate hike this March reached it’s highest level ever and now stands at 52%. So at this point, it’s more likely than not that March is a go, the fact that we simply don’t know if they will or they won’t or what Janet is going to do only adds to the excitement.
The US Dollar got a huge boost towards the evening that lasted until the closing bell on Wall Street.
We can see it a bit more clearly on the USDJPY, which rebounded strongly off the support at 112
Gold also retreated from her highs as many investors tend to falsely associate the probability of rate hikes as a gold negative.
Certainly, after reaching that high, the precious metal deserves a bit of a rest.
More Fed Ahead
With the odds of a March hike at 52% the Fed is in a really uncomfortable position. In order to avoid market instability, they usually like to see that number up around 70% or higher before commencing with a rate hike.
If they do plan to go ahead in March, they’ll need to talk it up like crazy and prepare everybody for the move. If they don’t plan to pull the trigger they’ll need to back off and cool the market’s expectations ASAP.
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We have several more speeches to look forward to until the end of the week and the culmination will be Friday evening when we’ll hear from no less than four Feders including Janet and Stanley. Vice chair Fischer’s speech will be the last thing we’ll hear from the Fed until the rate decision on March 15th.
There is a distinct and increasingly likely possibility that these speeches could potentially move the markets even more than Trump’s visit to congress.
Wishing you a spectacular day ahead!!
Best regards,
Mati Greenspan
Senior Market Analyst
