The Rate Hike on Dec 13th, 2016 is 99% Guaranteed

Observations

  • All eyes on the FOMC Fed meeting on the 13th. There is no excuse for not hiking the interest rates this round according to various sources.
  • This weak Bull run of 2009-present, 8 years, is believed to have finished its course and the post Trump rally is believed to be setup for a sell.
  • Various components of different indices are nearing their tops seen during the last Global Financial Crisis in 2008. The last few weeks we’ve been seeing the S&P and Dow making new highs almost every day. A closer look at the stocks that make up these indices indicate we are at certain significant resistance levels:
    • Fig. 1 – Goldman Sachs near previous 2008 high of $240.
    • Fig. 2 – Microsoft near previous 2000 high of $60.
    • Fig. 3 – Cisco near previous 2008 high of $35.
    • Fig. 4 – Merck & Co. near 2003 and 2008 highs of $62.
    • Fig. 5 – QQQ Powershares ETF tracks the NASDAQ 100 is near the 2000 highs of $120.

 

Fig. 1 – Goldman Sachs Price action (Source: TradingView.com)

 

Fig. 2 – Microsoft Price Action (Source: TradingView.com)

 

Fig. 3 – Cisco Price Action (Source: TradingView.com)

 

Fig. 4 – Merck & Co. Price Action (Source: TradingView.com)

 

Fig. 5 – QQQ – Nasdaq tracker Price Action (Source: TradingView.com)

 

Conclusion

So basically the play of following where smart money goes, which was to large blue chip high dividend companies, is now quite risky with historical resistance levels in play. Research also details that these levels are here for profit taking before another possible financial crisis. All in all being conservative with the allocations in the model portfolios is needed and I will continue to monitor the developments after the FOMC meeting today.

 

Best,
Michael