Weekly Market Assessment
Following the path of least resistance. Tell me if you have heard this one before, new all time record highs! This week we broke through the previous high of 1991.59 on the S&P 500, to new highs for the 28th time this year! These gains have been achieved on less than average volume, however this is the norm for the summer session and especially August. The stair stepping pattern in the market continues to follow a path of least resistance, where there looks to be no long term ceiling. The trend from the past 5 years, has been from bottom left to top right, with only a few small corrections to reload on positions. I never thought in this short of time we would be just 5 points away from 2,000 on the S&P 500! Extreme monetary policies continue to fuel this equity boom and with some recent comments out of the Federal Reserve this week, a hike in rates looks to be on hold till the summer of 2015.
Disagreement within the Federal Reserve. Fed Chief John Williams, said he doesn’t expect the Fed to raise rates until the middle of next year. While the Federal Reserve Bank of Philadelphia President Charles Plosser states that, “If the Fed gets this wrong here, I mean if [rate increases are] off by six months or a year, is there real danger to the economy? There could be, Mr. Plosser said." By this October, the Federal Reserve will be completely done with its bond buying program, that started years ago with $85 Billion a month (QE). The old saying you'll never know unless you try, well it looks like this "practice" could be soon approaching, when the Fed decides to do its first rate hike in years and in words of Charles Plosser, "The consequences could be dire if we get this wrong," Great! Our 10 Year Treasury Bond yields continue to drop while our equity market continues to rally, which concerns me. Bond yields should be following the equity market, however we have never been in this type of an economic environment before and this correlation may have been disrupted. Will we be in a dire situation this time next year or will the path of least resistance continue to hold true while being accompanied by a stronger economy and market then it is now?
Making the Watchlist: Below are the stocks that I will be looking at over the coming months. I will provide the the current stock price and why I am watching them. I will comment on them as I continue to keep an eye on them. You will be able to see and follow their growth and/or decline. Chart links may be attached.
From the Trading Floor to the Option Pit: A quick look at whats on the trading desk:
S&P 500 (SPX) -No trades
FireEye (FEYE)- Is a security platform that provides real-time protection to enterprises and governments worldwide against cyber attacks. After selling off huge after secondary offerings, this less than a year old public company has sold off huge, from $97 to now $28. It recently reported better than expected earnings on both the top and bottom line, while also raising next quarter and year end guidance. I have purchased shares for multiple accounts at $28.05. I have also sold a weekly Iron Condor to protect my position at $27/26 and $29/30
T-Mobile (TMUS)- After announcing recent takeover bids that didn't add to shareholder value and were turned down, TMUS has sold off 15% and is now below its 200 day moving average. I have purchased shares at $29.25.