Since the extreme hawkish September Fed meeting on last Wednesday, the markets have been in shock. The 2-year and 10-year treasury yields have gone parabolic while the equities in every sector sold off hard. The DOW took out its June low while the S&P 500 and NASDAQ held their respective June low. The 10-year treasury yield gap opened to a 12-year new high last Friday, but it failed to continue to
The much anticipated June Fed meeting was finally over. The Fed spoke clearly about what we have known for sometime. The re-opening is doing well thanks to the national vaccination efforts. Inflation is running high, but the the Fed is not raising rates and not tapering. The Fed could be tapering sometime down the road, but not now.
On last Thursday (10/08/20200) we sent out a private note stating that the small cap Russell 2000 index is breaking out in the midst of fiscal stimulus package negotiation. This is the first time ever that the Russell 2000 index is outperforming the Dow and S&P 500 since the Russell 2000 index topped in August 2018.
What Coronavirus that virtually has shut down the entire second largest economy in the world? It didn’t matter, the market has gone off the rails. It seems that there is nothing right now to stop the rally. The rest of the world is on life support, the US mega cap tech growth companies offer rare opportunities that provide growth and stability.
The market made a knee-jerk low on last Monday when the cronavirus hit the wire hard over the weekend. It traded sideways for the next three days, then on Friday it took out the knee-jerk low and closed below it. This is the confirmation of the weekly cycle correction is underway.
