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New Concerns Will Continue The Market Volatility

  • Written by Syndicated Publisher No Comments Comments
    October 22, 2013

    The volatility has been brutal since May when the Federal Reserve first hinted it might begin to taper back its QE stimulus, then relented, only to soon hint again that it might do so by its September meeting.

    When the Fed then made its ‘no-taper’ decision in September, Congress took over as the driving force of the volatility with its ‘on again- off again’ hopes for a resolution to the debt-crisis and government shutdown.

    There was not much to like about the shutdown, but at least the market was shielded from important economic reports, most of which had been trending negative prior to the shutdown.

     

    With the government re-opened, next week will begin the catch-up of those delayed reports.

    They may not be pretty.

    So far we know the delayed employment report for September will be released next Tuesday. The last report was that only 169,000 jobs were created in August, falling short of the consensus forecast of 180,000. But more troubling, the prior report for July was slashed to 104,000 jobs from the original report of 162,000.

    There’s still no word on when the delayed reports on the U.S. Trade Deficit, Retail Sales, Construction Spending, Industrial Production, and several others will be released.

    But as they mix in with the regularly scheduled reports like next week’s updated look at the housing industry (existing home sales on Monday, new home sales on Thursday), along with durable goods orders and consumer sentiment on Friday, there are concerns about September, even before it’s known what effect the shutdown had on October.

    So we can expect volatility to continue, with the economy and earnings taking over as the driving force until debt-crisis concerns return at year-end.

    Luckily, another positive from the shutdown besides the delay in economic reports, is that markets no longer need be concerned about the Fed tapering back its QE stimulus. If the delayed economic reports confirm a worsening slowdown was underway even before the shutdown added its damage, the Fed could just as likely decide to provide more stimulus and liquidity to try to get it back on track rather than tapering back.

    Then there is the history that the market tends to make most of its gains in the winter months. Will favorable seasonality help the Fed maintain an upward bias within the inevitable continuation of volatility?

    I’m still liking U.S. Treasury bonds and emerging markets as a hedge against the risk that remains in the U.S. market.

     

     

     

    They have the added attraction of rallying off lows rather than trying to extend already record highs.

    In the interest of full disclosure, I and my subscribers have positions in both TLT and VWO, in addition to positions in the U.S. market.

     

    Sy Harding is president of Asset Management Research Corp, and editor of www.StreetSmartReport.com, and the free market blog, www.streetsmartpost.com. He can also be followed on Twitter @streetsmartpost

     

    Sy was Timer Digest’s #1 Gold Timer for 2012 (Gold Timer of the Year) and #2 Long-Term Stock Market Timer.

    Images: Flickr (licence attribution)

    About The Author – Sy Harding, Street Smart Report

    Sy Harding publishes the financial website Street Smart Report Online and a free daily Internet blog at Sy’s Free Blog. In 1999 he authored Riding The Bear – How To Prosper In the Coming Bear Market. His latest book is Beat the Market the Easy Way! – Proven Seasonal Strategies Double Market’s Performance!

    It includes our research and analysis on the economy and markets, and provides charts and buy and sell signals on the major market indexes, sectors, bonds, gold, individual stocks and etf’s, including short-sales and ‘inverse’ etf’s.

    It provides two model portfolios as guides. One is based on ourSeasonal Timing Strategy, one on our Market-Timing Strategy.

    In depth updates are provided every Wednesday, with interim ‘hotline’ updates every time we make a trade. An 8-page traditional newsletter Street Smart Report is provided on the website every 3 weeks, in pdf format for viewing or printing out.

    There is the Street Smart School of online technical analysis ‘seminars’,commentaries to keep you ‘street smart’ about Wall Street, and much more. 

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