Today starts a fun filled news cycle. Today, we have the Fed, who will without a doubt Raise Rates. Tomorrow, we have the debt ceiling. And then we have the Dutch elections to top off the uncertainty.
1. The Fed
Under normal circumstance there would not be 1 chance in 1000 that the Fed would raise rates with the economic environment we are still facing here in the U.S. The argument goes that Trump will bring untold prosperity to the U.S. with his ideas and policies. Less regulation, lower taxes, no stifling Obamacare etc.
If Trump were left to his own devices I would say that would be exactly what would happen and it would be done well.
But never underestimate the dysfunction Congress. They have proven themselves time and again to be as pathetic a bunch of lawmakers as we have ever had in the U.S.
They spent the last 8 years helping Obama double our national debt without a word. And now when you have a Republican President, they want to not only fight him tooth and nail on policies that would without a doubt benefit the U.S. but also some would top it off undermine his Presidency.
Congress in my opinion on both sides of the aisle have reached a new low.
So, the idea that Yellen will now get aggressive in raising rates with this backdrop is a bit concerning. For 8 years after massive spending, Yellen did not raise rates 1 time. But now that we have the most dysfunctional political system ever she wishes to get aggressive? As they say, something does not smell right in Denmark:)
Which leads us to:
2. Dutch elections. My guess is the populist movement wins out there. Which will cause even more speculation of the demise of the EU as LePen in France has the lead in that country while Merkle is falling in the Polls. Globalism is almost dead in the water now, but the globalist will not let go. It looks like it will be scorched earth as they retreat to fight another day. And they will fight another day.
3. Debt Ceiling
Schumer is already talking about closing the government down if financing the wall and not financing plan parenthood is in the spending bill.
The problem is these are not level headed republicans making this statement. This is a statement from the Democratic party that has moved so far left that the politicians are promoting violence in the streets while undermining the President.
So I would not be too certain that they will cave on this as the Republicans did every time. Yes, every time.
If your buying this setup, which has been about as good as you can get in the past, the risk level has increased in my opinion geometrically.
There you have it. Feel like dumping all your hard earned money into the markets right now:)
So what could get us out of the woods? Yellen not raising rates today. This would create a rally of about 300 pts or more in the markets. The likelihood of that is almost 0.
An agreement on the spending bill. Again, almost 0 as I see it. But more than no rate hike.
Remember again, we are rapidly approaching may. And the sell in may crowd might be as right as they have ever been this year.
As far as what is in the backdrop I have not mentioned. Impeachment comes to mind. Remarkably many Democrats, if not most, are talking impeachment. In addition, there are some never trumpers in the Republican party that would welcome it. I will not get into arguments for and against but needless to say if this gains steam this market will drop like a rock. It will be a sight to see as my guess is no one alive now will have seen the drop we will see if that happens.
Not a pretty sight, to say the least, but Shakespeare said it best in the following dialogue:
“Allow me to explain about the theater business. The natural condition is one of insurmountable obstacles on the road to imminent disaster”
“So what do we do?”
“Nothing, Strangely enough, it all turns out well!”
We will see:)
Back to the stock market. I am down to one long and that is it right now. I am stalking a few stocks and the oil sector. In addition, would like to put on a mean reversion trade somewhere in here.
Of note, it is almost all green this morning, with Oil the strongest of what I look at.
If you want to follow some of my trades along with my thoughts typically given after the open you can go to @rickjswings. Typically I talk about the overall day expected with the markets and also give some levels on the ES and NQ for failed breakout scalping.
It’s my private twitter feed for the stock market and its free. Sports Handicapping is the subscription-based part of this site. But considering the cost of joining it’s almost free:)
Good Luck Today
RickJ’s Handicapping Picks
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