As expected, the market (as measured by the S&P 500 March Futures Contract) found its footing just below the 4520 support I had identified pre-market, bottoming at 4516. Then, as expected, it rallied right up to the Weekly Expected Move high at 4570. It has been a game of ping pong from there.
In fact, the market looked good until Fed Governor Bullard came out with his view that the Fed board should aggressively raise rates 1% by July and then start reducing its balance sheet in the second quarter. Any such move would be significantly more aggressive than what the Fed has already announced.
Needless to say, the market puked on the news, perhaps as intended. One might expect that the Fed is looking for a declining stock market to help tamp inflation down, and the market’s turnaround north is not all too pleasing to them.
Depending on how the day goes, we may need to reassess our strategy. We redeployed cash only a few points off the morning low, so we are well-positioned to raise more cash if necessary, though I don’t want to give back our morning gains.
Leveraged accounts already took their profits when the SPY was at 457.50 and have returned to cash.
This is a day to stay attentive.
A.F. Thornton