I was hoping for a couple of interesting things which could affect trading and pick up the volatility this week and we certainly got them in Spades on Friday. It was almost lived up to the old adage beware what you wish for.
Beside whip- sawing on the tax proposal news out of Congress the bond market rocketed up and filled a day session chart common gap from last Tuesday when a report out of Washington hit the tape about General Flynn’s guilty plea and plans to testify about the Trumps. Gold soared on the same piece of news along with a predictable fast tank in stock- indexes. As usual once the buzz saw of liquidation selling ended the stocks came clawing back but remain lower. Bonds and gold remain higher but are well off their highs.
The size of the reactions today was impressive as they were quick as notes rallied a full point and bonds printed a full three points off yesterday’s low. However the bigger range held the panic in check pointing out importance of knowing ahead of time where the levels are defining the top and bottom of a trading range. If a market is not in trending mode surprise news unlikely to cause more than a fast ping pong action within the larger congestion zone. This certainly was the case today across many markets.
Finally New York Fed President William Dudley had a not so complimentary comment about the likely tax cuts. He basically suggested now is not the best time to introduce fiscal stimulus as unemployment low and growth already strong. This idea will be a factor going forward. Please call for more discussion about the markets.
