While traders spent the week preparing for a possible Inauguration Day sell -off, market consensus seems to indicate the a fresh wave of buying an rally could be in the alley.
Last week was a quiet one on Wall Street as the market rally took a respite and traders and portfolio managers were content to take a breather and let the markets meander a bit. According to William Mingione, Managing Director and Head of Equities at Drexel Hamilton, the market seemed to be set up for a “Buy the election – Sell the inauguration” trade but things turned out different.
Daily U.S. equities trading volume averaged 6.38 billion shares for the holiday-shorted week ended January 20, down from 6.73 billion shares in the previous week, according to Bats Global Markets. “That never materialized (the buy election) trade,” Mingione began. “We were essentially flat for the week. The financials, which have been the leadership group, traded down marginally with many of the large caps reporting.”
And what did emerge during his calls and market chatter was the fact that perhaps many financial portfolio managers were caught off guard by the rally and missed the majority of it. This, he said, should and could provide good support for the group as these same PM’s will likely be buyers on any weakness.
“The bears have been desperately looking for a sell off, claiming that Trump’s regulatory proposals will take time, and the market has gotten way too far ahead of itself,” Mingione continued. “That sell off hasn’t come to fruition. The longer we go without a correction, the more likely we are to slingshot upwards.”
To back his point, Markets Media reports that several technicians see 2400 as the next resistance level for the S&P.
“We could be setting up for a run to that level over the balance of this quarter,” Mingione added.
Another trader said this so-called “Trump trade” could continue to divert the market’s attention from the Federal Reserve, which up until last November’s election, was foremost on the market’s collective mind. He reminded that the Fed is still a major concern and that it still is expected to hike short—term interest rate at least twice, if not three times, this year.
“Just because the headlines have ignored the Fed doesn’t mean they’re not a concern – or a major concern – to the market,” the trader said. “I’d still be very wary in this market environment of a move.”
In other market news, Thesys Technologies was selected over Sungard and Finra to build the Consolidated Audit Trail.
Originally, ten firms were vying to build the market tracking system designed to monitor and collate equity and options market data. Then last July the list of prospective builders was shortened to six and then to three in November.
SROs affiliated with a bid were recused from voting pursuant to the CAT selection Plan Amendment approved by the SEC.
The CAT is expected to help regulators track the complex machinations and microsecond dealings in the US equities and options markets and provide a data repository. This repository would be used for either research or for policing the markets in cases of suspected wrongdoing.
An SEC spokesperson declined to comment on the selection.
This Week’s U.S. Economic Indicators of Interest:
|Tuesday||Redbook Retail Sales|
|Wednesday||Existing Homes Sales
Richmond Fed Mfg Index
New Home Sales
Leading Economic Indicators