Last week we saw the technology laden NASDAQ market drop over 10% from its prior week high, hitting 6906 down from a high of 7728 a week earlier. We have spoken at length over the last few letters how insiders and institutions have been selling out of technology positions but retail seems to be picking up what they are putting down. This kind of action where the weak hands are buying from the strong hands is a notorious set up for a market set back and last week did not disappoint.
Chair Yellen didn’t waste any time reassuring markets last week that the FED, despite their wherewithal to hike rates and shrink balance sheets, will remain mostly accommodative. She mentioned specifically that “the federal funds rate may not have to rise all that much further to get to a neutral policy stance.” Neutral, this term, always annoys us because it seems very relative. Neutral to what? Historical? Do we not live in unprecedented times or is QE just a normal everyday expected monetary operation now? Wasn’t it supposed to be temporary? Now some 9 years later still awash in some $200 billion in global central bank QE per month, the fed has decided that it’s time to move to a more “neutral” policy stance. Don’t even!