Mosaic Chart Alerts
Investors Shrug Off Warsh’s Hawkish Tone as Broad Stock Rally Takes Hold.
In this post, I’ll focus on setups that I’m monitoring for both long and short positions. With a chart and short write-up, this is a quick way to scan and plan potential trades.
These ideas are the end result of my process to identify stocks offering the right combination of growth fundamentals along with a proper chart setup. Live alerts are sent to Traders Hub members only.
Stock Market Update
The first Federal Reserve rate-setting meeting under new chairman Kevin Warsh contained more hawkish surprises than investors expected. Heading into his nomination, Warsh has been under intense pressure from President Trump to lower interest rates. That prospect was always going to be difficult given the Fed sets interest rates by committee, but Warsh came across as being hawkish in his commitment in bringing inflation down to the Fed’s 2% target while removing the easing bias from the Fed’s meeting statement. Across the committee, nine of 18 members providing projections saw at least one rate hike this year which brought forward market-implied probabilities for a rate hike to the September meeting. Following the meeting, the 2-year Treasury yield that tends to lead changes in fed funds jumped to the highest level in over a year and is well above the current fed funds rate (chart below).
While equities initially sold off on the hawkish surprise, major indexes mostly recovered the losses and finished a holiday-shortened week with solid gains on a peace deal between the U.S. and Iran. This time a deal has actual substance with both sides signing an agreement that also reopens the Strait of Hormuz. Stocks are rallying as oil prices pull back, but it’s the recent improvement in breadth that’s most notable. During the rally off the late March lows, participation was narrowly concentrated in tech sector names especially semiconductor stocks. But as recent economic reports point to solid overall activity, the average stock is catching up. You can see that with the cumulative NYSE advance/decline line, which is now breaking out to new record highs following a period of consolidation (chart below).
The broadening rally is starting to drive a new round of breakouts, where we’ve been adding positions to the model portfolio. I’m also monitoring developments and chart action in ETFs covering sectors like biotech and international regions that are setting up constructively. Keep reading to see:
Open ETF positions.
Open stock positions.
Chart analysis for new trade ideas.
