Posts filed under “Markets”

Impact of Fed on Short-term Trading

Is there any pattern to trading around the FOMC meeting?

click for larger graph
Fedreact

chart courtesy of Michael Panzner

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Michael Panzner, whose charts have been gracing these pages quite regularly, observes:

Since the Federal Reserve began raising interest rates in the tightening cycle that began on June 30, 2004, the stock market has exhibited a curious short-term bipolarity in reaction to the central bank’s actions.

Generally speaking, regardless of which way prices finish up on the day of the hike — usually higher, though last time around they fell by more than 1% — they have tended to swing in the opposite direction 24 hours later.

Some might say that these short-term swings are nothing more than noise, casting little light on what is going on in the wake of the central bank’s widely-telegraphed strategy of boosting rates back towards more neutral levels.

A cynic might argue, however, that rather than having their anxieties assuaged by Dr. Greenspan’s supposedly more investor-friendly and transparent approach, market players remain as confused as ever about where things are — and where they are headed.

Maybe it’s time to change the meds?

Category: Economy, Markets, Trading

Is the Fed a Leading or Lagging Indicator?

Category: Economy, Markets

Will April Showers Bring May Flowers?

Category: Markets, Technical Analysis

Chart of the Week: China M2 Money Supply vs. Chinese GDP

Category: Economy, Markets, Technical Analysis

Sell in May (but don’t go away) Part II ?

Category: Markets, Technical Analysis, Trading

Hedge Fund Assets

Category: Markets, Trading

A few items worth reviewing

Category: Commodities, Economy, Markets, Weblogs

Meta Meta-Market Resources

Category: Markets, Weblogs

Understanding the Post-Bubble Economy

"Economists set themselves too easy, too useless a task if in tempestuous seasons they can only tell us that when the storm is long past the ocean is flat again."

– John Maynard Keynes, Tract on Monetary Reform


Overview:

- Economists and fundamental analysts often miss cycle turns.
- There’s always another recession — and expansion — coming (eventually).
- Learn to separate hand-wringing permabears from credible commentators.

If you have been listening to the financial press recently, you might be shocked (shocked!) to learn that inflation has been increasing and the economy is slowing.

You don’t say?

Of course, readers aren’t just now discovering that this economy has been suffering from inflationary pressures for more than two years, as a chart of the CRB shows.

It’s the same with GDP. Follow the numbers: The third-quarter 2003 number was 7.8% (originally reported as almost 9%), the next quarter’s was 4.2% (originally 6%+) and 2004′s quarterly data came in at 4.5%, 3.3%, 4.0% and 3.8%.

This week, we learned the first quarter of 2005′s number of 3.1% was way below consensus expectations. While some will tell you that 3%+ GDP growth is pretty decent, it’s the trend of waning momentum that is the issue. An early mentor of mine used to admonish traders to not look at the photo, but to watch the full movie instead.

So much for the idea of kinda-sorta-eventually-efficient markets hypothesis.

Slowing GDP and rising inflation have been discussed on this site for over a year now. The investing issue with macroeconomic concerns is not the actual data, but how — and when — that data affects psychology. It’s a question of timing. The commentators who are first now discovering weak GDP and inflationary pressures are not much help to you once the ocean is flat again.

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Category: Economy, Markets

Category: Investing, Markets, Media