Feds Frustrating The Masses

The S&P 500 Index has, over the last three days, closed below its 20-Day Exponential Moving Average. We've seen this kind of action ever since the Brexit vote. Generally, we would consider a healthy trend in the market one that can stay above its three major averages; the 20-day exponential average, 50-day simple moving average and the 200-day simple moving average. Breaking the 20 day exponential moving average is fairly common and the 50-day simple moving average is where large institutions will often begin to pick up more shares in stocks that have pulled back. It is the 200-day simple moving average that can really raise alarms since there are only about 250 trading days in a year. Breaking the 200 day can often times indicate that the primary trend has changed. For now though, the short term, intermediate-term and long-term trends in the market have not changed. The trend is, as of today, indicating higher prices in the near future. Looking back at the market action this past week with the NASDAQ losing -0.4 percent and the S&P 500 losing -0.7 percent, one could say that the pullback has not been that bad so far but, we have to keep in mind that both indexes were up quite a bit earlier in the week and then gave most, if not all, of it back. This is called stalling in the market. It is no different than when your car begins stalling on you. Usually that would mean something, perhaps you have a clogged fuel line or an electrical problem. In either case that creates some uncertainty. Is something wrong with my car? You've got your big road trip coming up and you don't want to get stranded. How frustrating is it, when you pick up the car and the mechanic says, "I didn't find anything wrong with it?" How do you feel now? Perhaps more concerned than ever before. That is much like this market we are in; crude oil prices continue to fall, volume is, at times, very lean, although we are in the summer doldrums, when many serious money managers have gone to the Hamptons. We keep getting conflicting numbers such as the July new home sales number soaring to new heights and reaching some of the strongest levels in 9 years. Then we have the NASDAQ making new highs and then pulling back with stalling action and snapping an 8 week winning streak. GDP numbers have been horrible. Jobs reports are good. There are a lot mixed signals out there. Is the economy getting better or not? According to the Federal Reserve Chair Janet Yellen, the case for a rate hike has "strengthened" yet she didn't indicate or imply that it would be this year. Later the same day, Fed Vice Chairman Stanley Fischer stated that two rate hikes this year would be "consistent" with Yellen remarks. This is confusing for the public and the markets. Currently the Gold & Silver mining stocks are pulling back with the potential of the dollar going up with the on again, off again rate hikes. And even though rate hikes would be good for banks and insurance companies who make their money on higher interest rates we saw stalling in the bank stocks too! In short, the market is not convinced that the Feds will move at all this year. We will have to keep a close eye on the market especially since September is typically the most challenging month of the year for Wall Street. Gold & Silver mining stocks will also need to firm up if they are to keep their upward trend. So, far they are feeling the heat of a potential rate hike, but that could change tomorrow. This is a frustrating market for all, me included.