Are Investors Now Fighting The Fed And The Tape?

I'm not sure whether it was the late Marty Zweig or his buddy Ned Davis who originally coined the phrase, but it appears that after yesterday, anyone long the stock market may now officially be fighting both the Fed and the tape!

Investors came into Wednesday in a hopeful mood. And at one point, the Dow Jones Industrial Average sported a gain of nearly 400 points on the session. This was no small feat given the fact that the tally on the Dow's dance to the downside since December 3 stood at more than 2150 points and the venerable index had fallen -12.1% from the late-September high. And when glancing around at the rest of the major indices, that number actually looks good compared to the drop of -13.1% seen on the S&P 500, the dive of -16.03% on the Nasdaq, the decline of -15.8% on the S&P Midcaps, and the -20.9% hit the Russell 2000 had endured.

Nevertheless, the thinking was that stocks were oversold (this is true), sentiment had become bleak (also true - and usually a good thing from a mean-reversion perspective), valuations had improved (check), the government was going to stay open (it turns out the jury is still out on that one), and that Jay Powell was going to usher in what was sure to be a stunning Santa Claus rally.

There was hope that what is commonly referred to as a face ripping rally would propel the S&P 500 back into positive territory for the year and everyone could enjoy their New Year's Eve parties knowing that their 401K's had grown a smidge in 2018.

Bah Humbug

But a not-so funny thing happened on the way to the stock market party. Yea, that's right, it didn't happen. Instead of the expected Kris Kringle imitation, Jay Powell donned his Ebenezer Scrooge costume and queued up When Doves Cry as his theme song for the post-announcement press conference.

Sure, Powell used the phrase "data dependent" (isn't that what we all wanted a month ago?). And yes, he did kinda, sorta acknowledge the concept of #GlobalGrowthSlowing with his "troubling cross-currents" verbiage. But the bottom line is the new Fed Head flat-out bonked on the idea of "one and done," which is apparently what the trading computers wanted to hear.

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Disclosure: At the time of publication, Mr. Moenning held long positions in the following securities mentioned: none - Note that positions may change at any time.

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