Scalper1 News
Major averages rose on above average volume on news the Bank of Japan was moving into negative interest rate territory. This may push the ECB to further lower rates which are already negative. Indeed, European money market rates are pricing in a more than 100% likelihood of a 10-basis-point March cut by the ECB and an almost 100% likelihood of a cumulative 20-basis-point cut by year-end. Friday’s action qualified as a textbook “follow-through” day as all the major indexes were up well over 2% on higher volume. The number of stocks in buyable positions remains scant, although we will be monitoring the market for developments if this current rally attempt is able to sustain to the upside. Bernanke said the Federal Reserve may also adopt negative rates as another tool to stimulate growth. This would imply a reversal of its prior rate hike akin to 1936 when the Fed hikes rates only once when the US was deleveraging a long term debt cycle. They hiked the discount rate by 0.5% in 1936 then eased until 1940. They could repeat this action again should conditions worsen, hiking once, then easing by way of negative interest rates and/or QE4. Nevertheless, the bounce remains suspect as oil and Chinese stock markets continue their slide. In addition, the Fed is still leaning toward rate hikes at some point this year, and leading stocks such as AAPL, AMZN, NFLX, EBAY, and PCLN are still underperforming. Further, consumer spending was flat in December as Americans continue to hoard their cash, and the Fed’s favorite inflationary indicator, the PCE Index, climbed 0.6%, the fastest pace in a year. The Fed wants to see the PCE climb to 2%. Of course, this measure of inflation has been manipulated lower to give the Fed an excuse to enact further monetary easing if necessary. Scalper1 News
Scalper1 News