Once Again, Near a Bounce or Break Level
What can be expected of the U.S. stock markets now that they are on the verge of breaking the low that was established earlier in the summer? This sell-off in some ways is not surprising as we have been discussing the possibility of it for the majority of this year. The underlying factors that have led to this bizarre situation where good news is now perceived by the markets as bad news is a function of the market not acting off of normal market related items.
What do we mean by this?
The market is selling off this week because the job numbers have been the best they’ve been in over five months. Normally, it is said that if job numbers are good, then the economy is healthy! This should mean good things for stocks, but it seems the Federal Reserve controls the market forces with the slightest of whispers. The stock market now responds only to the actions or lack of actions by the Fed, instead of normal economic factors. The way the stock market is interpreting this good news relating to job numbers is this; good job numbers mean the Federal Reserve will be encouraged to raise interest rates more aggressively to slow inflation. Therefore, a larger than normal interest rate hike is expected in the upcoming meeting of the Federal Reserve interest rate committee in November. The problem with this from a market and economic perspective is that the Federal Reserve has a historical tendency to over-shoot and be late to the party.
The current issue we are now experiencing with inflation was partially caused by the Fed’s inept reaction to the pandemic. It provided low interest rates at the same time as the Federal Government provided unprecedented stimulus. It then failed to react based on its delusions that the inflation was transitory. The biggest problem really started 13 years prior to that as the financial markets grew overdependent on quantitative easing, meaning the Federal Reserve bought assets in the open market.
This market bubble that we are currently in is in the process of bursting. When a bubble pops, it is usually unpleasant for the people who are caught unaware that we were living in circumstances that were unsustainable. We can see from the charts provided where the market should snap back to.
The last stock to fall was predictably Apple ($AAPL) and will also likely be Tesla ($TSLA) as these two companies lead on the way up and have so far been the last two stocks to hold as the bubble has started to implode. $AAPL is currently one of the biggest stocks under pressure as its iPhone13 did not need much improvement and the release of the iPhone 14 did not create much of a craze. Apple is also plagued with supply chain problems, chip shortages and additional issues similar to many other companies around the world.
Other world issues such as hurricanes, a bleeding natural gas pipeline, possible problems between China and Taiwan, a shift in politics in both Italy and the U.S., tensions between Russia and the West, and a host of other problems that are too numerous to list have led us to the current state of the markets.
All of this pending volatility, will add up to current volatility, making this market excellent for short sellers and day traders. However, investors and buyers beware as a market hurricane approaches. Taking caution for all market participants seems to be the most prudent approach. Trade well until next time.
Market Research and Analysis provided by Michael DiGioia, Director of Educational Services
What’s New from DAS
Please note that we have updated our refund policy to reflect the following: All sales are final. DAS does NOT offer refunds on any purchases of data subscriptions or Add-On services. Once purchased, subscribers will retain access to the product and data until the end of their subscription period.
We didn’t release any production updates during the month of September, we did release beta versions: 5.7.2.0 for testing. In this beta release, we implemented the following changes:
-Bug Fix: Position window sometimes shows stock positions even when “display options positions” is selected.
-Added: “Use Long Symbol” checkbox to options config window.
-Added filter for group of traders in Admin->Trader Logons.
-Market Viewer window – added option to delete selected rows.
TradeSignal:
– Added verification to the value entered into the filter before saving.
– Added new FTimer filter.
-Bug Fix: Corrected hour value for DST for “Expired Date”.
Admin Position Window:
-Added bid/ask refresh;
-Added “AccNotes” and “AccCurrEQ” (account current equity) columns.
-Added option to use new GUI for “Edit Risk Control” dialog of Account window.
We do encourage our users to become a beta tester. If you are interested in becoming a beta tester, simply fill out the contact form on our website and include the firm/broker you’re trading with as well as your login ID.
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