Thursday 18 August 2016

A September rate hike?

US equity indexes closed moderately mixed, sp +4pts @ 2182 (intra low 2168). The two leaders - Trans/R2K, settled +0.4% and -0.3% respectively. VIX settled -3.6% @ 12.19. Near term outlook offers renewed upside... straight into the 2200s, with the 2225/50 zone seemingly probable by mid September.




So.. the sp' floored at the upper end of the secondary gap zone of 2168/64. The market will now be vulnerable to further chop, but leaning to the upside. A move to the 2200s looks due.

VIX finally broke back into the low teens... but couldn't hold them. Further cooling to the 11s looks a given. The only issue is whether we'll see single digit VIX with sp'2225/50 into September.

More fedspeak

Along with a few sporadic comments from officials like Dudley and Lockhart, the latest FOMC minutes has again resulted in the market questioning whether the Fed might actually raise rates in September.

Frankly, it seems highly unlikely. After all, Yellen will still have reasons 482-485 to throw at the media hacks at the press conf' of Sept'21st.

My best guess remains - as it has been the early spring... no rate hike until the Dec' FOMC.

On this issue though, I'd hope to be wrong. Higher rates are a good thing...and would (ironically) inspire confidence in the US market/economy. Financials would be particularly helped, and I favour Bank of America as having the best potential of the financial stocks within the Dow.

BAC, monthly

BAC has been struggling - like most other financials, since getting stuck in early 2014. The $18 threshold is critical. Any monthly close >$18, would be extremely bullish, and offer an initial target of the psy' level of $20, and then powerfully onward to the 28/30 zone. The latter is going to require a 'Disneyland' scenario of higher rates - at least to 1.5-2.0%, with a US economy that can keeping ticking along.

In any case... BAC is one to watch, and the importance of the $18 threshold is something most should be aware of.

Goodnight from London