On Wednesday Janet Yellen came out and said that the stock prices are “Quite high”. As you would expect stocks sold off even further after an already dovish week. One might ask why would the Fed Chair openly speak out against a market that they have helped prop up over the last 8 or so years?
Over those same years I have watched as the Fed has become an excellent trader, improving its skills with every QE. So what would a great trader with unlimited resources do when the market has been stuck in a trading range for the better part of 2015? They would sucker in shorts, especially if they knew that very good news was on the horizon. This is exactly what Queen Yellen’s speech was designed to do.
Well enter the NonFarm Payroll report. Being late this month, it wouldn’t surprise me if the big boys already had access to the number (see chart below). The consensus was 280K of job creation, a number too low and the market would worry about a slowing economy, a number too high and the market would worry about rates rising too fast. Both scenarios would result in further downside. However a number close to the consensus would easily lift the market. The number came in at 265k and long story short, the SPX closed up 28 points and the shorts are once again ready to be roasted.
This week is a crucial week in the market, we are near the top of the trading range and poised for a break out. With the extra fuel form the Yellen shorts there are slightly greater chances for one. However, bears are not dead yet until a decisive new high is reached. I also have a few indicators that make me question how strong this bull actually is.
– Trader Tony