Ahead of this week’s Fed decision on interest rates, Art Cashin discusses the weakening global economy and what to expect from the Fed tomorrow.
On The Floor Monday…
March 19 (King World News) – Here is today’s note from legend Art Cashin: On this day in almost any year, you can tell what day it is by looking for the signs. Of course, what signs you look for depend on just where you live, particularly if you live on an island. If you live on an island near Capistrano you look for swallows, for this is the day they return. Or, if you are on the island in the park in Hinckley, Ohio you look for buzzards – – for truly, this is the day that they return each year.
But, if you are on an island named Staten, you look for red carnations and pastry trucks – – for this is the Feast of San Giuseppe (St. Joseph if you went to an Ivy League School). The Feast of the “Patron of the Family” is the perfect excuse to stuff yourself and your friends with gobs of cream or dough and sugar, baked, fried or whatever and masquerading under names like: zeppoles, sfingi and cannolis. It’s an Italian wink at the Lenten calendar – and a tasty wink at that!
There were no pastries on the floor Monday but things could hardly have worked out sweeter for the bulls.
Stocks began the day mixed to mildly better to start the week. Helping lift prices was strength in the financial, energy and consumer discretionary sectors.
In late morning, new questions popped up in the Boeing story and that caused a mild downdraft in the Dow and S&P. The bulls regrouped shortly before noon and for the balance of the session, stocks moved slowly but steadily higher.
There was a bit of a flip in the final minutes, which was caused by a sudden shift in the market on close indications.
At about 3:45, the closing imbalances shifted from $500 million to sell to $700 to buy. That produced a mild spike in the averages.
Another good day for the bulls.
When Seasonal Patterns Collide – This week’s action could be very interesting as two normally reliable seasonal patterns appear ready to collide.
The first is the tendency of the market to move lower in the week following a quarterly Expiration. This is especially true after a March Expiration. Tom McClellan points out that the week after a March Expiration has been down in 24 of the last 31 years. Jason Goepfert adds that the March pattern has worked in seven of the last seven years.
On the other side, we have the Fed meeting and the “Fed drift”. The Fed drift is the tendency for stocks to rally in front of a Fed decision, especially those followed by a press conference.
Originally, the Fed drift worked for the 24 hours before the Fed statement. Recently, the drift has drifted to begin two days before the statement up to the statement.
It will be interesting to see which of these patterns prevail. Of course, they could both work out if we rally into the statement and then sell off sharply going into week’s end. Fasten your seat belts.
A Signal Or Just A Divergence? – Overnight my friend, Peter Boockvar, wondered whether the bond market might be sending a signal to the stock market.
Here’s a bit of what Peter wrote:
You’ve heard it here, you’ve heard it there, you’ve heard it everywhere. What’s the bond market saying about the US economy and why does the stock market think otherwise. Or you may say the bond market is just responding to the Fed blinking and prematurely ending their rate hike cycle and ending QT earlier rather than sooner. Or yields are falling because bond participants believe inflation is quiescent and/or yields have plummeted overseas. All true but whatever, I’ll reiterate my belief that the drop in global yields is due predominantly to the reality of a slowing global growth story and that is now becoming more apparent in the US.
Worth keeping an eye on.
Overnight And Overseas – Asian equity markets are showing small changes after yesterday’s large spikes in China. Tokyo and Shanghai closed fractionally lower, while Hong Kong saw a fractional gain. India saw a moderate rally, perhaps on polling shifts.
European markets are modestly higher as PM May prepares to ask for a Brexit delay that some think could be as long as one year.
Among other assets, Bitcoin has moved back above $4000 for the first time in months. Gold and crude are both moving higher. The euro is a bit firmer against the dollar. Yields on the ten year are down a tick or two.
Consensus – The Boeing thing still lurks out there with the risk of liability still up in the air. More revelations from the black box could move markets.
Some speculate that the Fed may have to sound super dovish but we won’t know that until tomorrow afternoon. Stocks strain for a technical breakout.
Stick with the drill – stay wary, alert and very, very nimble.
***KWN has now released the powerful KWN audio interview with Gerald Celente and you can listen to it by CLICKING HERE OR ON THE IMAGE BELOW.
***Also just released: Greyerz – James Turk – Check Out This Spectacular Multi-Year Accumulation Pattern In Gold CLICK HERE TO READ.
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