One Day Is Not A Rally, But You Never Know

One Day Is Not A Rally, But You Never Know

As a Prince fan since the 80s, I'm always tickled by headlines like this morning's in theWSJ MarketWatch: Why this stock market could be getting ready to party like it’s 1999.  

One Day Is Not A Rally, But You Never Know
One Day Is Not A Rally, But You Never Know

Sure, it could be. Yesterday the US markets rallied enough to erase Tuesday's losses, and apparently the bearishness of many analysts and traders.

What a difference a day makes. Overnight, most stock futures, European and Asian indices, as well as gold, and the dollar were all flat to modestly up. After the open, the Nasdaq is rallying while other US markets are down slightly. Crude oil futures are down a little less than a dollar, but up from the pre-market low. With the dollar up, the euro fell once again and is close to the lows of earlier this week. 

Speaking of Prince, the artist formerly known as the Artist recently announced a series of surprise concerts as part of his "Hit and Run" tour. Instead of waiting months and planning to go to the concert, fans wait months for a sign that Prince might be playing a concert near them and then try to get a ticket before the brief opportunity passes.

Sort of like the way people have been waiting for a chance to jump into the market and instantly ride it to new highs. It's unlikely to be that easy, but the market does have a way of taking bad news and turning it to good. It may be that stock traders are getting comfortable (if not quite ready to party) with a strong dollar and higher interest rates to come. 

This morning there's a calm across most major markets, which could be a calm before the party, or not. Here in Chicago, it's the warmest day so far this year. It used to be if the outdoor seating at the cafes near the Board of Trade was full at lunchtime on Friday, it meant that traders were starting their weekend early and the markets would be quiet. Now, it might just mean they've pre-programmed their trades for execution and they're going to let the robots do the work.

While stocks fluctuate above and below yesterday's closing prices, the day holds little economic news. Producer prices fell 0.5%, against an expected rise of 0.4%. Consumer sentiment is due at 10 AM but is unlikely to have much effect either way.  The Nikkei closed above 19,000 for the first time in 15 years. Europe's Stoxx 600, the FTSE and the DAX all appear likely to close down slightly. Whether crude, gold, and the euro will continue their slide and the dollar will retest its highs, however, remains to be seen.

All in all, it's a day where anything could happen and markets are likely, even if they end up closing without much change, to have fluctuations up and down. Next week is options expiration in a number of futures contracts including the E-mini S&P 500, which usually spurs some buying. And lately the S&P futures have seen the return of a phenomenon traders call the late Friday rip, a charge to the upside as funds try to finish out their buying for the week. Buying and selling on the close, by computer programs executing complex strategies, has been the driver of price action in both stocks and crude oil, according to the floor and prop desk traders I hear from.

But as we know, smart buyers will wait for pullbacks and while the pullbacks are happening, short sellers will hop in for some quick scalps. Anything and quite possibly everything could happen. And who knows? Prince might even announce a concert this weekend. Happy Friday.

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