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Listen to Mark S. Young's Interview on MarketView
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According to my risk summation system, the days next week with the highest risk of a turn in or acceleration of the current trend in the DJIA are Monday the 20th of September and Friday the 24th. I was surprised when FED Wednesday didn't make the cut, but maybe they won't say anything too non-liquidus just yet. Jerome will be making a speech on Friday the 24th where he could try to sneak one over the goal line without as much attention as the FED press conference.
Last week the Tuesday risk window tagged the DJIA low and the high for the week all wrapped up in one day. The Friday risk window may have caught a low depending on what happens during the Monday the 20th risk window. It is possible that the Friday the 17th and Monday the 20th risk windows are actually just one wide window, which a new low on Monday would confirm. If there is a rally on Monday, they are separate windows.
The next key risk window is centered a bit more than two weeks away on October the 4th. In the past these key risk windows have tagged crashes and multiyear lows in the DJIA. These key risk windows only work about one in thirty times that they have occurred, and they don't occur all that often. Given the FED money pump is running in overdrive, a crash is hard to envision, but if by some miracle they finally see the error in their ways and mention tapering the funny money during the presser this coming Wednesday the 22nd or maybe even during the Friday speech, a nasty reaction at some point in the next few weeks may not be that far fetched because heaven knows we can't have a happy stock market without money oozing out of absolutely every pore of the FED.
Fantastic EXTREMELY HECTIC 2-week period - 8 of 9 days profitable. Far more daytrading of options, cannot remember the last time I daytraded this many Options. Also, more trading in night and early morning sessions.
Holding vastly reduced SHORT positions, added NAT GAS shorts. More on this later.
Market could still decline into the FED meeting but I expect a bounce, either from these levels near 4480 to 4400, or a bit lower but bouncing after the FED meeting. I will rebuild SHORTS on any rally above ES 4450
A Storm Is Brewing. For a market said to be looking for a narrative, investors seem to be assuming it will be a messy one. While losses weren't as steep as in weeks prior, major U.S. indexes tumbled into the red for the week.
The Dow Jones Industrial Average lost 0.1% on the week, the S&P 500 lost 0.6%, and the Nasdaq Composite lost 0.5%. Shares of drugmakers fell as an outside Food and Drug Administration advisory panel late today recommended against approving a booster dose of Pfizer's vaccine for anyone 16 and older, while voting in favor of a booster for people 65 and older.
Of course, there's plenty of reason for investors to be cautious, as Barron's economics reporter Lisa Beilfuss writes:
Covid-19 hospitalizations are rising, and consumer confidence is plummeting. Geopolitical risk is building after the U.S. departure from Afghanistan and China’s regulatory crackdown. Price inflation isn’t relenting. The latest debt-ceiling fight will probably go to the 11th hour, raising the specter of default or a rating downgrade.
Most importantly, fiscal and monetary policy are on track to tighten concurrently, just as economic growth slows sooner and faster than predicted. Tax increases are coming, and fiscal stimulus is fading, while chances are rising that the Fed will this year start reducing the monthly bond purchases it started to support the economy early in the pandemic.
Against that backdrop, many on Wall Street are warning of a correction. They say it's a matter of when, not if. One analyst sees a 10% to 12% correction in the offing, based on the confluence of factors.
But why now, Lisa writes, when the overriding force behind the markets right now—the Federal Reserve and its global counterparts' flood of liquidity—isn't going anywhere.
Cutting through the noise and flashing lights, there is one number that sums up where markets are and where they go from here. Global central banks are buying about $300 billion in assets a month, notes Torsten Sløk, chief economist at Apollo Global Management. “There are a lot of things going on. But at the end of the day, this is the key.”
Investors should pay heed to the risks because market downturns create buying opportunities, Lisa concludes, and the Fed put is real.
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