Sunday, August 21, 2016

Stock Market Weekly: Expect Down Stocks

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*Fed Chair Yellen's speech Friday is key.
*Traders may be leaning dovish after the minutes but we expect them to be negatively surprised Friday.
*Inflation and jobs numbers are building forcing the Fed's hand now to sound hawkish.
*With the market having a good run behind it we think some downside is now realistic.
We are getting bearish on the S&P 500 (NYSEARCA:SPY). The Fed is now trapped to confirm that a good jobs number September 2nd will require a rate hike. The Fed has done everything they could to avoid a hike in front of the elections. Fed Chair Yellen's speech could be the first negative market event since the Brexit vote.
Key Upcoming Events
Thursday: Jobless Claims
Friday: GDP
Friday: Fed Chair Yellen speaks.
August 29th: PCE
September 2nd: Non-Farm Payrolls and wages
September 21st: FOMC Decision
October 7th: Non-Farm Payrolls and wages
November 2nd: FOMC Decision
November 4th: Non-Farm Payrolls and wages
November 8th: Elections
The Setup Based On The Above Calendar: Fed May Have To Move In September
If the Fed does not act in September and September 2 and November 4 continue the strong jobs trend, the Fed will be considered "behind the curve" and will have lost credibility to sticking to their mandate. They cannot do anything November 2nd because it is right before elections. That leaves them with their September 21st meeting.
This Friday: The Fed is forced to say to expect a rate hike if there is another strong jobs number.
The Fed has a building problem. They have tried to soft-pedal a rate hike to avoid a risk event ahead of elections. Non-farm payrolls are bouncing back to 2015 levels. Those 2015 levels led to the December hike.
Fed Chair Yellen this Friday is forced to say one key thing that locks the Fed into a rate hike before the elections.
She is forced to say this Friday that if September 2nd's jobs are strong it is realistic for a rate hike on September 21st.
Here are the jobs numbers.
The key is to look where jobs numbers were (above) ahead of the December hike. October through December were 295, 280, 271. The December rate hike can take some of the credit for cooling the pace soon after.



Chaim Siegel has been working with hedge funds and mutual funds as an analyst and PM his entire career. Chaim specializes in earnings and predicts, analyzes and reacts to earnings and earnings events as well as developing current company stories with a hedge fund perspective. If you want his analysis real time sign up to the right for real time email alerts. #in, $spy, $qqq, $iwm, $vxx, $ycs, $fxe, $EUO, $YCS, ^GSPC, INDEXSP:.INX, #elazaradvisorsllc, CME Globex: ES Disclosure: These trades can lose you money and principal especially when using leverage BY USING THIS SITE YOU AGREE TO TAKE ALL RESPONSIBILITY FOR YOUR OUTCOMES AND LOSSES AND HOLD BESTIDEAS, ITS CONTRIBUTORS AND ELAZAR ADVISORS, LLC HARMLESS