Frantic Response to FED

Late yesterday and today has seen a bit of volatility as a Macro event has occurred and the old story of buy every dip in the stock market may not be the play, other than for a day trade.

Now we see the conflict of two time frames. We are dealing with stock markets that reflect future hopes, not reality today. Yet we have a FED trying to live in todays environment not the future, Powell says taper will be “well into the future, will be orderly, methodical, and transparent”.

Well, maybe inflation is not an appropriate word. We are not seeing an economy that works, we are just seeing both FED and Fiscal Policy that just keeps adding money. The rising numbers and GDP don’t really reflect anything happening just more free cash.

The Player Response

The CNBC cheerleaders are out in force trying to put a good face on what is really a Macro event and not at all about what they are saying. All this as money this week has been pushing into and now defending the FANG stocks.

Most Important Reaction

Probably the most important reaction is being seen in the dollar rise over the past two days.

And for the FED the most important take away is that they know too much liquidity has been thrown at the economy since the spring of 2019, it is not so much about COVID and the Reopen hopes.

Where are Possible Surprises

I sense the reopen trade has run out of momentum and at the moment growth inflation is not in play, the hot numbers have been about people and corporations gearing up for the end of COVID and the expected NEW Normal. The infrastructure bill is on hold in Washington and people have already made their big purchases of houses and cars.

Here are some arithmetic average sector charts to back up the above comments. Charts updated at 11:00 AM CDT.

First here is a chart of the combined S&P, Nasdaq 100, Russell, and Dow Jones Industrials. Rolling over a bit, but no crash yet, have to wait for the 21 and 50 day averages to finish turning down.

Next, we have the FANG stocks, being pushed up and defended this week by the Hot Money.

Next we have the dollar, showing a lot of strength at the moment, somewhat due to the facto that everybody was on the other side of the boat.

The remaining stock groups are reflecting various levels of selling pressure.

First GOLD.

Next, we see the infrastructure stocks.

Next, the Leasure/Travel stocks.

Next, the Main street retail reopen stocks.

Next, the commodity index.

And finally, what I call the Wanna-Be Fang stocks which topped some months ago but were were being pushed up earlier this week, but now are getting selling pressure.