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A little follow-up
The Fed raised rates 1/4 point as expected and the market shot straight up before drifting a bit before the close. The immediate 100 point gain after the announcement was due to some comments hinting that an end to rate hikes may be in sight.
I wanted to follow up on some of the comments I made yesterday:
The large stocks of the Dow and even Dow Transports are still pulling back more than the smaller stocks. The Dow is now about 1.84% off its high, while the small cap index Russell 2000 is just .57% off its high. I'm not making any guesses on exactly what that means, but one will likely move closer to the other in the days ahead.
The Dow was up .52% yesterday and the Russell 2000 was down .07%.
The bond fund was flat Monday after being down earlier in the day. The late bounce came from the point I had hoped would act as support. Let's see if it can hold and move higher from here.
Bonds stayed above support with the Lehman AGG Bond Fund up .38% (F fund was up .09%).
The dollar could chop around for a couple days but my guess is we may see the next support level tested (near 89) very quickly.
The dollar moved back up to the old support before moving back down some to end the day up .10%.
Remember, in the days following a Fed rate change, stocks tend to reverse the initial knee-jerk reaction.
That would mean a move down today. The S&P closed in the opposite direction the day after a Fed meeting 6 of out 7 times in 2005, and 68% of the time in the past 10 years. There have been 8 times in the past decade where the Fed raised rates and both stocks and bonds closed higher on the day. 5 days later, the S&P showed a return of -1.4% with 3 of 8 positive. 30 days later, the return dropped to -2.9% with only 1 of the 8 managing a positive return (of 0.1%).
There has been no technical damage done to the indices yet so it is still a bullish environment. If we do see some selling in the days ahead it could either bring on a Christmas buying opportunity, or it could bring on that pullback I am waiting for that will bring the psychology leg back into healthy mode. That may have to wait until after the holidays but we'll see.
That's all for today. Currently 100% F fund. Thanks for reading.
The Fed raised rates 1/4 point as expected and the market shot straight up before drifting a bit before the close. The immediate 100 point gain after the announcement was due to some comments hinting that an end to rate hikes may be in sight.
I wanted to follow up on some of the comments I made yesterday:
The large stocks of the Dow and even Dow Transports are still pulling back more than the smaller stocks. The Dow is now about 1.84% off its high, while the small cap index Russell 2000 is just .57% off its high. I'm not making any guesses on exactly what that means, but one will likely move closer to the other in the days ahead.
The Dow was up .52% yesterday and the Russell 2000 was down .07%.
The bond fund was flat Monday after being down earlier in the day. The late bounce came from the point I had hoped would act as support. Let's see if it can hold and move higher from here.
Bonds stayed above support with the Lehman AGG Bond Fund up .38% (F fund was up .09%).
The dollar could chop around for a couple days but my guess is we may see the next support level tested (near 89) very quickly.
The dollar moved back up to the old support before moving back down some to end the day up .10%.
Remember, in the days following a Fed rate change, stocks tend to reverse the initial knee-jerk reaction.
That would mean a move down today. The S&P closed in the opposite direction the day after a Fed meeting 6 of out 7 times in 2005, and 68% of the time in the past 10 years. There have been 8 times in the past decade where the Fed raised rates and both stocks and bonds closed higher on the day. 5 days later, the S&P showed a return of -1.4% with 3 of 8 positive. 30 days later, the return dropped to -2.9% with only 1 of the 8 managing a positive return (of 0.1%).
There has been no technical damage done to the indices yet so it is still a bullish environment. If we do see some selling in the days ahead it could either bring on a Christmas buying opportunity, or it could bring on that pullback I am waiting for that will bring the psychology leg back into healthy mode. That may have to wait until after the holidays but we'll see.
That's all for today. Currently 100% F fund. Thanks for reading.
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