By: Tom Gentile
on March 23rd, 2023
Yesterday, the Federal Open market Committee made the decision to raise interest rates another quarter of a point. This was in line with the majority expectations and while that should have been seen as a good thing – meaning ‘no surprise’ the equities markets sold off, especially strong the lats hour or so of trade.
The concern as we see it and will wrap up this article with is the uncertainty about the economic outlook going forward, e.g. will the regional bank crises getting fixed – how will the hot jobs market continue to impact inflationary concerns and can the Fed execute a soft landing to name a couple.
Financial Market Adages
You may have heard the phrase the markets climb a all of worry. What this says to us is markets can rally higher in price. Markets can see good news coming out on a variety of fronts and those feel-good items can bring in buyers.
All the while that goes on, there always seems to be a concern of this is great, but how long can it really last.
Another adage/phrase is Bulls take the stairs and Bears take the elevator.
This encapsulates the view that while things are deemed bullish, and buyers go to work putting their money to work they do so in a more calculated, moderately paced manner compared to when bad news hits and everyone rushes to sell their position.
The Bulls are a bit more deliberate and take their time adding to their positions over time. But when it seems things aren’t going so well the Bears quickly unload their positions and rather than selling over time the need to preserve capital overrides the mentality of being more calculated in the amount they sell and they dump larger amounts of their holdings.
For lack of a better analogy, consider how a movie theatre fills up. Some people get their early, some almost on time, some just on time and some a bit late. Eventually the movie theatre fills up.
As soon as someone yells fire! There is no getting out of the theatre in a controlled pace over time, but rather you’re likely to see everyone high tailing it to the exit all at once and all in a congested frenzy, (no matter the theatre message prior to the movie starting saying in the event of an emergency walk don’t run to the nearest exit).
Treasury Secretary Yellen and Fed Chair Powell NOT Speaking the Same Language
Chairman Powell spoke about the Fed’s decision for the rate hike and then tended to questions from many financial outlets representatives asking about what the rate hike means, what is the outlook for regional banks and if this hike will hurt those smaller banks, what about future rate hikes – will they continue and to what extent.
While the rate hike was expected and received, which should provide a sense of calm to investors he didn’t really offer too much clarity and hopes on how things will truly resolve themselves for the better.
He did try and maintain the faith and confidence of investors by saying the banking system was resilient and strong. He also made a point to say for all to hear all depositors are/would be safe.
Then Treasury Secretary Janet Yellen spoke.
Her commentary was looked at as both a contradiction to what Powell was saying and as her backtracking from what she had said prior.
Where she had previously intimated depositors in these troubled banks were to be protected, yesterday she did what was deemed a 180-degree turnaround suggesting that not all banks would be deemed important and not all depositors would be made whole. That is the time, basically 3pm US ET when the selling really accelerated.
Confusion Causes Indecision in the Markets
The two different points of view expressed from the two of them was deemed confusing.
If any of you have gone in to a buying decision situation, when you don’t have the answers you need to differentiate buying one item from another and you hear from a couple of different sales people a difference in opinion you have a hard time acting or making a decision.
The thing is with the financial markets sometimes it goes beyond indecisions and folks seem to want to take the approach let’ just sell, let things settle and make more sense and see where the sell off and prices settle and THEN we will decide if we want to start buying again.
App: Toms Option Tools
Market Insight articles may show images of lists of stocks meeting a variety of options parameters like Unusual Call and or Put activity or Expensive IV found on my app Toms Option Tools.
Other times I will have other charts may work to amplify my educational points.
Those options data lists, however, can be found on my app Tom’s Option Tools. Use your device to search up and download this app and get free access to the Morning Reports section of the app.
Other parts of the app are available at a premium subscription rate, but the Morning Reports Lists are yours free.
Stock and options trading has large potential rewards, but also large potential risk.
You must be aware of the risks and be willing to accept them in order to invest in the stock and options market. Do not trade with money you cannot afford to lose.
This is neither an offer to buy/sell/ or recommend a particular stock or option.
Hypothetical or simulated performance results have certain inherent limitations. Unlike an actual performance record, simulated results do not represent actual trading. Also, since the trades have not been actually executed, the results may have under or overcompensated for the impact, if any, of certain market factors, such as lack of liquidity. Simulated trading programs in general are also subject to the fact that they are designed with hindsight.
No representation is being made that any account will or is likely to achieve profits or losses similar to those shown.
Disclaimer of Warranties and Liabilities Tom Gentile and TomsTradingRoom, LLC including employees, consultants, and editors (“Publisher”) cannot and do not warrant the completeness or accuracy of the content found in our areas, or its usefulness for any particular purpose.
Tom Gentile and TomsTradingRoom, LLC also make no promises that our content or the service itself will be delivered to you uninterrupted, timely, secure, or error-free. Under no circumstances will Tom Gentile and TomsTradingRoom, LLC be liable for direct, indirect, incidental, or any other type of damages resulting from your use or downloading of any content on our site.
This includes, but is in no way limited to, loss or injury caused in whole or in part by our negligence or by anything beyond our control in creating or delivering any portion of Tom Gentile and TomsTradingRoom, LLC.
You are agreeing that you bear responsibility for your own investment research and investment decisions. You also agree that Tom Gentile and TomsTradingRoom, LLC will not be liable for any I, investment decision made, or action taken by you, or others based upon reliance on news, information, or any other material published by Tom Gentile and TomsTradingRoom, LLC.
Tom Gentile and TomsTradingRoom, LLC relies on various sources of information that we believe to be accurate and reliable. However, we make no claims or representations as to the accuracy, completeness, or truth of any material contained on our site.
Tom Gentile and TomsTradingRoom, LLC are educational portals, providing content for educational and informational purposes only. Neither Tom Gentile nor TomsTradingRoom, LLC are a broker/dealer. Investors need a broker to trade stocks and options and must meet certain requirements. All securities, futures, and investments data and ideas are offered to self-directed investors. All prices in USD unless noted otherwise.
A full disclaimer can be found here: http://www.tomgentile.com/legal_disclaimers.html.