Consolidating Ahead Of Jackson Hole
The markets are down slightly in early trading, but have mostly been consolidating in a sideways fashion after failing to hold at new highs last week. This Friday brings the big Jackson Hole symposium where investors think Bernanke could comment on further QE initiatives.
I still fall in the camp that says with the markets near new highs, the Fed would rather keep its powder dry. My guess would be we will just hear more of the same from the Fed, that they stand by ready to support the economy with easy monetary policy should economic growth continue to slow. As such, I think if the markets are pricing in more QE announcements on Friday then we could see some disappointment.
In economic news, the latest consumer confidence reading for August came in at 60.6, which is well below last month's reading of 65.9. Separately, the Case-Shiller home price composite rose 0.5% which is a nice turn from last month's decline of -0.7%.
Asian markets were mixed overnight after the Japanese govt. downgraded its economic assessment due to slowing exports. European markets are generally weaker this morning despite stable peripheral bond yields. ECB Pres. Draghi said he will not attend this week's Jackson Hole symposium due to a heavy workload.
The dollar is lower today, with commodities mixed. Oil prices are higher to $96.25 after weakness yesterday. Gold prices are flat near $1675. Silver prices are higher while copper is lower.
The 10-year yield is lower again to 1.63%, nearing its 50-day support. And the VIX is currently flat 16.32. It also bumped into its overhead 50-day resistance this morning before turning lower.
Trading comment: The market continues to trade in a fairly tight range. It has been awhile since we have seen big swings in the market. And with the VIX at 16 and change, it doesn't appear that traders are expecting volatility to pick up in the near-term. But in my experience, having an event like Jackson Hole on the Friday before Labor Day could be a recipe for increased volatility. I think trading volumes are likely to pick up in September, and the contrarian prediction would be for the market to complete this multi-month cup-and-handle formation its working on and stage another upside breakout.
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