Have you ever been so frustrated in something that you knew it was time for that thing to change? That’s how I feel right now. I’m fed up with this bullshit market and its utter resilience to anything thrown at it. The Fed has done all it can do. Interest rates are, for all intensive purposes, zero. The Fed is well into the taper of quantitative easing. Citing that they will be done with QE within the next few months. The Fed has acknowledged that the economy is not as strong as they would like to see it, but unemployment is in their target zone. Job creation is on target (according to them). We have recovered the jobs lost since the great recession (but no one counts the amount of new people that have entered the workforce since then). But the big factor that is looming over this picture of the US being in great shape is the fact that inflation is higher than the Fed would like to see it. The only way to stop the run away inflation is to raise interest rates. Now, everyone I know would welcome higher interest rates. I’m sure you would too with your money earning nothing in savings accounts. But, if the Fed does raise rates, it will raise the rates on mortgages. That will kill the housing market, which will kill the economy, which will finally hit this market.
You would think that with the market so bullish, that some smart people would be preparing for an inevitable pull back in the markets. But Nooooo! There is still record complacency. The pundants are still waiving the bull flag. No one feels that there is anything that can bring the markets down. Think about it. We have a high likely hood that war will break out in the middle East with Hamas sending rockets into Israel. Syria sending rockets into Israel. Fighting still continuing in the Ukraine. And…the raising of the concerns of more credit defaults in Portugal, and Greece. These can start another round of monetary woes reverberating through Europe, which can spread across the globe.
Asia is also not doing that great economically. With a slow down in China (the world’s second largest economy), it will just take a small push for people to realize that there is more risk in the world and the markets than anyone is expecting.
I, for one, am salivating for the ONE time that when the markets drop in the morning…they do not recover, and there is no one to buy. The air gap that is already built into the market needs to come to fruition.
The upcoming week is loaded with reports that could send more negative messages to the markets.
Starting Tuesday we have the retail sales, which are paramount to the economy growing. If the consumer starts slowing its purchases, that will be a good sign for the bears.
Janet Yellen will be giving her testimony too. Let’s see if she starts to harden her dovish position on the Feds stance with easy money and interest rates.
Wednesday we have the producer price index along with the home builders index. Janet Yellen will be speaking again.
Thursday we have the weekly jobless claims which came in better than expected last week with an expectation of 315K, coming in at 304K. Housing starts will also be in the forefront of the news with expectations of 1.01million starts. Last month we saw the first time of 1million starts since 2007.
Friday brings us the University of Michigan consumer sentiment numbers. The estimate is higher than the previous month.