Apple & The Fed. A Volatile Concoction…

The FOMC begins their regularly scheduled two-day meeting today. Typically, stocks are quiet with a small upward bias. However, Apple reports earnings after the bell and that almost always provides some movement as the tech behemoth has an outsized weighting in the S&P 500, Dow and NASDAQ 100. I have absolutely no opinion on how their earnings will be and I really only care about how the market reacts anyway. The fact that it has sold off into earnings gives the bulls a slight edge to reverse the weakness by the end of the week.

Getting back to the Fed, expectations are that rates will remain as is for now with June as a less than 50% of a hike. September should be off the table as it is an election year and there is no clear and present danger to fight. So that really means that if Yellen & Co. do not hike rates in June, December is the next viable option. What a far cry from four rate hikes in 2016 as first forecast by the Fed!

Regarding the stock market, I remain in the cautious camp since last week as I believe the major indices are in the process of peaking. Apple will have a lot to do with the short-term direction of the NDX which is underperforming. None of the four key sectors are rolling over which is one reason I believe we will just see a modest pullback. Previous defensive leaders, staples, utilities and REITs are all bouncing back, but it looks like they have seen their peaks for a while and strength should be sold.

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Lots of News This Week

While last week was certainly news filled, this week will be even busier as the northeast plans for another snowmageddon. At the bus stop this morning, our new neighbors who are from Dublin talked about the more than 10 cases of water they bought. When I stopped laughing, I asked them what they planned to do with all that water. And while they were at it, I asked them if they also bought canned goods and ammo! That conversation gave me a good chuckle to start my day.

After the blizzard prep, we will be hearing about the actual “epic” and “historic” storm until the clean up takes over. Although I would rather head to Vermont like I did when the 40 inch “epic” and “historic” storm hit two years ago, I promised my wife that I would stay home since they are forecasting high winds and possible power outages. What kind of father and husband would I be if I celebrated a powder day while my family was stuck home freezing?!?!

Anyway, besides the storm, Apple and Google are set to report earnings this week and both are potential market movers. We also have the Fed meeting on Tuesday and Wednesday with a 2 pm announcement on the 28th.

Looking at the stock market, the short-term line in the sand is remaining above last Thursday’s low on a closing basis. Should the bears muster enough energy to take stocks beyond that, the market is probably going to new 2015 lows and below the December bottom. But let’s cross that bridge if and when. For now, defensive sectors are leading and that is telling potentially two very different stories.

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