by Ian Harvey
February 28, 2018
After Fed Chairman Jerome Powell testified investors panic because they are seeing “shadows of doom and gloom”.
Yesterday saw Fed Chairman Jerome Powell testify on Capitol Hill.
Our economy is strengthening, according to Powell – this is a bad thing according to many traders and investors – because it could mean a more aggressive tightening of policy.
Odds of four rates increases in 2018 rose to 33% from about 20% on Monday, according to CME Group’s Fed Watch Tool.
But investors are seeing “shadows of doom and gloom” where there isn’t any. Powell has not deviated from the script – he will follow what is necessarily best for the economy.
It appears that many investors are living in ‘70’s – worrying about inflation which is not an issue at this stage.
I summed up my impression of the on-going problems surrounding the market and the volatility effecting our moving forward successfully in an email that I sent to the “mentorship” members of Stock Options Made Easy on February 23……here is a copy of the letter…..
UPDATE – The State of Our Trading
There is very little that should be upsetting the markets and producing all this volatility that we are experiencing.
I believe that traders are seeing “shadows of doom and gloom” where there are none. As the market rally has run for such a long time traders are very nervous and do not want to be caught like the 2008 downfall. But this thinking is certainly not justified or sensible. Traders are grasping at any little bit of news to cause mayhem with the stock prices and add to the volatility.
As such, thinking such as this is causing such a disturbance in the market progression – look at yesterday for instance -- the Dow was trading comfortably in positive territory all day ahead of the reveal of the Fed's meeting minutes, and upbeat commentary from the central bank on U.S. economic growth initially sent the index soaring more than 300 points after the release.
But, unfortunately stocks pulled back sharply in the final hour of trading, as concerns – note concerns, not convincing concerns, over rising interest rates sent the 10-year Treasury yield spiking to a four-year high.
This in turn hit the S&P 500 and Nasdaq, as well, with the latter index once again failing to capitalize on a strong showing from tech stocks.
The drastic pullback in the trade recommended yesterday -- Pandora Media – built up and then sank to close the day at over -8%. The report emerged, which was quite good and sent the stock back into positive territory – over 10% pre-market – to fall again back below our entry price but still have a gain of over 6% from the market closing price. However, this does not justify expectations as results should have been much higher (bear-in-mind, this could change again when the market opens again) and does not accommodate our recommendations.
As well, several past recommendations were making good progress during the day and may have reached a positive outcome if there had been no mishaps. But this was not to be. Luckily we still have time before the expiry of same.
As to those recommendations that have fallen by the wayside – it seems to be a case of volatility and trader interference that has worked against us. All the intensive research has not been of any consequence!
As to moving forward, I would suggest we see what transpires today before executing any further moves. It may be a time for consolidation of trades that we are still holding before moving on – let us see what happens and then move on to more positive aspects to build our accounts back up.
….END OF EMAIL….
In other words, it is not so much as problems with what we are trading but what the overall market sentiment is doing to the volatility and its effect on the stock prices and earnings reports.
And as to yesterday’s pullback of the major indexes – much the same – panic by investors and traders seeing “shadows of doom and gloom”.
Let’s just get on with positive trading as there is really little of any consequence to cause the market to suffer these set-backs.