U.S. stock markets are set to open higher this morning after a strong Super Tuesday showing for Joe Biden. The move comes a day after a Federal Reserve inter meeting rate cut of 50-basis points failed to rally markets. Investors appeared to like the potential of a Biden, a moderate, victory in a potential race against the progressive Bernie Sanders. Today, the Fed will release the Beige Book report, which will show how the coronavirus could be affecting the U.S. economy.
The S&P 500 sold off on Tuesday down to support at 29765.63 only to rally late and closed at 3003.37. The RSI index turned lower after moving out of the oversold zone and closed at 32.36. There is now a trading range of 3108.99-2976.63 that is forming, and we feel this could be a potential bottoming process. However, markets are still vulnerable to pullbacks on negative news and fears, so continue to maintain our short -term bearish stance.
We are currently long-term bullish and short-term bearish.
John N. Lilly III
Accredited Portfolio Management Advisor℠
Accredited Asset Management Specialist℠
Portfolio Manager, RJ
Dominguez & Jones Wealth Management Group
The Relative Strength Index (RSI), developed by J. Welles Wilder, is a momentum oscillator that measures the speed and changes of price movements.
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This report on economic conditions is used at FOMC meetings, where the Fed sets interest rate policy. These meetings occur roughly every six weeks and are the single most influential event for the markets. Market participants speculate for weeks in advance about the possibility of an interest rate change that could be announced upon the end of these meetings. If the outcome is different from expectations, the impact on the markets can be dramatic and far-reaching.
If the Beige Book portrays an overheating economy or inflationary pressures, the Fed may be more inclined to raise interest rates in order to moderate the economic pace. Conversely, if the Beige Book portrays economic difficulties or recessionary conditions, the Fed may see the need to lower interest rates in order to stimulate activity. Since the past recession, traders worry about the impact of the Beige Book on the timing of tapering quantitative easing.
Since the Beige Book is released two weeks before each FOMC meeting, investors can see for themselves at least one of the many indicators which Fed officials will use to determine interest rate policy, and can position their portfolios accordingly.