Look for Reasons to Stay Long

 | Aug 22, 2014 | 4:26 PM EDT
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If the goal of Fed Chief's Janet Yellen's speech at Jackson Hole, Wyo. was to not upset the market, she did a very good job. The indices barely moved on the much anticipated discussion of how the labor market is influencing potential interest rate hikes.

The big positive was that even though there were no surprises, the market had a minor "sell the news" reaction to the speech -- even though it was technically ripe for some profit-taking. Market players have learned that that you just don't sell Fed news

Now that the Jackson Hole event is over, we are moving into one of the slowest weeks of the year in front of the Labor Day holiday. Since earnings season is over and Jackson Hole is history, the only news flow will likely be macro-economic events such as the events in Ukraine.

Although market volume has been quite light lately, the underlying support has been impressive. Market players have had little interest in letting positions go. They are more worried about being left behind than they are concerned about being too long in a technically extended market. There was a little rotation into more conservative stocks on Thursday that sparked some caution, but the speculative action perked up again today, especially in China-related names.

The market has been climbing straight up on light volume for a little more than two weeks now. The easy and logical thing to do is to look for a pullback but the more profitable thing is to look for reasons to stay long. Next week is going to be slow but there should be some opportunities for those who are willing to work. 

Have a great weekend. I'll see you on Monday.

Aug 22, 2014 | 10:20 AM EDT

Nothing Overtly Hawkish From Yellen

  • And that's good enough for some of the bulls.

We have a soft start to the day and so far Fed chief Janet Yellen's speech at Jackson Hole isn't seeing much of response. As expected, she is keeping the Fed's options open and saying that more data are needed in order to make decisions.

There is nothing overtly hawkish in the comments and that is good enough for the bulls. Some buying is kicking in now, but breadth is still negative and there isn't any rush to load up. It looks mainly like machines are reading the headlines and trying to cause something to happen.

There is very little news flow other than Jackson Hole today and traders are struggling to look for action. The cop camera stocks, Digital Ally (DGLY) and Taser (TASR), are attracting some attention and some of the stocks I've mentioned lately like Tarena International (TEDU) and Mandalay Digital (MNDL) are acting OK. MobileIron (MOBL) is a new shark technical buy as of last night and that is attracting some attention. I took starter positions in TechTarget (TTGT) and Himax (HIMX), but they both need better volume to take it back to breakout levels.

As has consistently been the case, the bears who are looking for a sell-the-news reaction to the Fed are on the wrong side of the market again. The buyers are providing support and the Fed is still viewed as market friendly. 

August 22, 2014 | 7:45 AM ET

Ukraine Causes a Flutter Ahead of Yellen

  • The market hasn't sold off on the Fed for a long time, though.

An attitude of positive expectation is the mark of the superior personality. -- Brian Tracy

Markets at their highs don't just suddenly fall apart and go straight down, but they do occasional take a rest. Conditions are particular good for some sort of pause as Janet Yellen makes her much-anticipated speech on labor market at 10 a.m. this morning.

It is very unlikely that Chairwoman Yellen will provide a concrete timeframe for the Fed's plans, but market players will be looking for some subtle hints as to whether interest rate hikes will occur sooner rather than later. Yellen has consistently been vague as she repeatedly states that the Fed is "data dependent" and will only move as it considers the latest economic reports.

The bulls are convinced that the market will continue to trend upward if there isn't anything surprising out of Jackson Hole, but we are seeing some minor flaws in the action that may be signally some stalling action.

Another factor that is coming into play this morning is the movement, once again, of Russian troops into Ukraine. That caused a brief hiccup last Friday and it already caused a flutter in futures this morning. Europe is mainly red and there is very little news flow in the early going.

The indices held up well on Thursday, but under the surface there was quite a bit of rotational action. Money moved into banks and some of the more conservative names like Intel (INTC), Disney (DIS), Microsoft (MSFT) and Hewlett-Packard (HPQ). Small-caps bounced after a selling squall in the morning, but speculative action cooled off, especially in many of the China names that have been leading, as well as in biotechnology, which is always higher risk.

While there may be some warning signs out there, it must be kept in mind that the market hasn't sold off on Fed worries in many years. Jackson Hole has produced seven-straight years of market gains as the central bankers never seem to tire of pleasing the market with more and more accommodation and cheap money.

The bears are focusing on better-than-expected economic news and some downward pressure on bonds as an indication that change is coming, but they have been anticipating that for many years and have been proven wrong. Yellen is very unlikely to give the bears the news they are looking for, but technically this market may be due for some rest.

In recent years it has consistently been a mistake to look for a sell-the-news reaction to news events, especially those involving the Fed. When we do have a pullback the dip buyers jump in very quickly. If we do some sort of softness on Janet Yellen's speech, I'll be looking for the pullback buyers to go to work very fast.

While we are set up for some weakness, it is likely to be little more than just another buying opportunity. 



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