Market When Closed, Sunday 2 March
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Top Marks For The Diving Catch!
by Alex King, CEO, Cestrian Capital Research, Inc
At Friday’s close, the market looked on edge, as I mentioned in the daily note. All four equity indices - if you can call the Russell an index rather than, you know, a grab bag of rando stonks - had no interest in challenging their 50-day moving averages from below, and the Nasdaq was seriously considering re-visiting its 200-day moving average, only about $10 down for the $QQQ as of Thursday’s close.
Three things happened Friday which were of import to securities pricing.
- The PCE report came in as a continued glide-slope down. PCE inflation at 2.4% vs 2.6% prior is what you want to see if you own risk assets - because it tells you that the current Fed funds rate is likely set too high for the real economy. And that tells you that - whatever the dot-plot and whatever today’s punditry drums up - the Fed is likely going to be cutting on the basis that policy needs to be looser. That benefitted the 10yr yield and right out the gate that was good news for $TLT and other things in the US government bond complex.
- A very public White House meeting as regards the Russian invasion of Ukraine and its potential resolution, or otherwise.
- Monthly opex which given the Doomer Vibe in evidence right now I rather assume was put-heavy on investors’ parts, which if true would mean that dealers were short puts into the close and as those puts expired had to re-balance their books by buying the underlying stocks and futures to get back to delta-neutral. (We can check this later but the final 30 min buying frenzy would suggest this was true).
The possibility or otherwise of Global Thermonuclear War held the S&P down by about .5% for an hour or so. PCE down .2% and some dealer rebalancing pushed the S&P up by 1.5% into the close. I don’t think that reflects well on us all as economic creatures, but I don’t make the rules.
February was a difficult month for long-only equity investors; it was easier if you know how to hedge (if you don’t, we can help - click here for our Inner Circle service) - and it was better still if you know how and why to own US government bonds right now. The same link will help you with that if it is new news to you.
Let’s get into the weeds.
Short- And Medium-Term Market Analysis
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