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Daily Market Update – January 29, 2014 (Close)
When the S&P 500 Futures opened for trading about an hour after the Turkish Central Bank announced a huge 4.5% increase in its overnight lending rate, it rallied sending the futures up about 9 points.
This morning they’re down by almost 10 points.
That’s quite a turnaround.
I’m not really certain what the reason for that reversal is, but the overnight futures aren’t necessarily a good indicator of where the markets will find themselves trading the next day. I really don’t know why I even bother looking at them or why I sometimes get hopeful or fearful.
Today, once again, attention gets turned to the 2 PM release of the FOMC minutes and the key question is whether the taper will continue or be deferred, based on recent employment data and perhaps other factors that may reflect a weaker than expected economy.
It’s hard to know what the impact of recent overseas weakness might be on the Federal Reserve. Things used to be very straightforward, but now everything is connected. These days Turkey matters.and you have to wonder whether a 12% overnight rate might pull some money away from the United States and into Turkey or all of the other countries that are bound to raise their rates in response to some rate creep here in the US.
I’m glad I don’t have to think about these sort of things.
While I don’t expect much of a surprise in today’s FOMC release, it’s always fascinating to see the initial responses and so often the reversals of those responses, as well as the delayed responses. So often it seems that an hour later, or sometimes the next day is when euphoria or fear set in.
As with the past two weeks I’m hopeful that the market can hold it together long enough to send some reasonable mixture of rollovers and assignments in order to be able to fully participate in next week’s market.
Until then it may be another bumpy ride as the market has been showing continued weakness this morning and likely to erase yesterday’s gains.
As it would turn out there was no surprise in the FOMC minutes but the market just added to the already triple digit losses, for no real reason, other than prevailing sentiment.
Is this simply a susceptible market or one that is inherently weak? Today I think it’s just a susceptible market.
The likelihood of executing any new purchases to day is pretty small, as I am already at my lower limit for cash reserves at 20% and besides, it’s a Wednesday, which are usually slow anyway.
For now, I’m content to see how the world deals with a changing interest rate environment and currency fluctuations. Those are two things that I really don’t understand and have always kept my distance from those markets.
Whether the current “crisis” is additive, infectious or simply one in passing will be clear in just a few days.
This is a good time to be a passive observer.
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