Second Interest Rate Hike Signals Possibility of Four Hikes in 2018

With the two-day Federal Reserve Monetary Policy meeting over today, Fed officials announced the second of what is expected four interest rate hikes in 2018. Rising rates from its previous range to 1.75%-2.00% had a muted effect on major market indices as the Dow and S&P saw modest losses while the Nasdaq is holding on to a slight gain for the day. The new interest rate hike and subsequent market reaction indicate what has been true all year: the market has been overbought. Investors should monitor Seasonal Charts for support and resistance levels and continue selling into the rallies.

The modest market reaction was also partly tempered by big-name losses and gains in the tech and telecom sector. Tuesday’s regulatory ruling regarding AT&T’s Time Warner acquisition not only cleared away for that acquisition but other major mergers that have been sitting on the backburner. Fox saw a good boost from this as this surely cleared the way for it to be acquired by Disney, as well as the T-Mobile and Spirit merger. The new telecom and entertainment landscape has caused CBS to consider its once on the table acquisition from Telecom as well as added interest in Comcast countering Disney’s offer to Fox with their own. Major winners of the court ruling and thereafter ripple effect throughout the market were Fox, Comcast, Time Warner, and CBS, while AT&T and Verizon took losses for the day.

With the FOMC over and U.S. interest rate lifted to the range of 1.75% to 2.00% on an 8-0 vote, investors have begun factoring four interest rate hikes for the year. The unanimous decision and tone thereafter had confirmed what some investors have speculated since the first interest rate hike this year. With two more hikes expected this year, traders can expect interest rates to be in the range of 2.9% by the end of 2018 and 3.4% by 2020.

Chairman Powell took questions after the meeting and with tariffs and the looming prospect of a trade war hanging around U.S. markets he was often asked for his opinion and possible Fed reaction to the recent White House moves. Powell refused to address specific trade actions or White House announcements on the matter but indicated policymakers were foremost interested in keeping inflation at its 2% target. The Trump Administration Tax Cuts have also been brought up and while Powell offered optimism on his perspective effect of the cuts, he neither supported or denied the White House claim that cuts will bring 3%-4% economic growth, contradictory to all the data feds have released this year. In regards to U.S. financial stability Powell once more offered optimism and while acknowledging some asset risk assured households and banks were doing superbly.

Using the ^GSPC symbol to analyze the S&P 500, our 10-day prediction window shows mostly positive signals. Today’s vector figure of -0.13% moves to 0.07% tomorrow before climbing higher into positive territory. Today’s predicted support and resistance levels are 2,774.81 (±6.67) and 2,786.85 (± 6.70), respectively. The predicted close for tomorrow is 2,792.18. Prediction data is uploaded after market close at 6 p.m., CST. Today’s data is based on market signals from the previous trading session.

Highlight of a Recent Winning Trade

On June 11th, our ActiveTrader service produced a bullish recommendation for TJX Companies, Inc. (TJX). ActiveTrader, included in all paid Tradespoon membership plans, is designed for intraday trading.

Trade Breakdown

TJX opened near Entry 1 price range of $94.44 (± 0.38) and moved through its Target Price of $95.38 in its second hour of trading, reaching a high of $95.49. The Stop Loss was set at $93.50.

Thursday Morning Featured Stock

Our featured stock for Thursday is  Visa, Inc. (V). V is showing a confident uptrend in our Stock Forecast Toolbox’s 10-day forecast. This stock is assigned a Model Grade of (B)– indicating it ranks in the top 25th percentile for accuracy for predicted support and resistance, relative to our entire data universe.  Our 10-day prediction model shows positive vector figure reaching +1.04% in four trading sessions which then incrementally builds throughout the 10-day forecast. Our benchmark for vector figures is +1.00%.

*Please note: Our featured stock is part of your free subscription service. It is not included in any paid Tradespoon subscription service. Vlad Karpel only trades his own personal money in paid subscription services.  If you are a paid subscriber, please review your Premium Member Picks, ActiveTrader or ActiveInvestor recommendations. If you are interested in receiving Vlad’s personal picks, please click here.

The stock is trading at $135.14 at the time of publication, up 0.21% from the open with a +0.39% vector figure.

Thursday’s prediction shows an open price of $135.08, a low of $134.75 and a high of $135.85

The predicted close for Thursday is $135.15. Vector figures stay positive and drive upward from there. This is a good signal for trading opportunities because we use vectors as a primary factor in determining price movements for stocks and ETF.

Prediction data is uploaded after market close at 6 p.m., CST. Today’s data is based on market signals from the previous trading session.

Note: The Vector column calculates the change of the Forecasted Average Price for next trading session relative to the average of actual prices for last trading session. The column shows expected average price movement “Up or Down”, in percent. Trend traders should trade along the predicted direction of the Vector. The higher the value of the Vector the higher its momentum.

Oil

After a larger than expected decline in domestic crude supplies, oil traded higher but was offset by a rise in weekly production as reported by the EIA. West Texas Intermediate for July delivery (CLN8) is priced at $66.68 per barrel, up .42% from the open, at the time of publication.

Looking at USO, a crude oil tracker, our 10-day prediction model shows mixed signals. The fund is trading at $13.48 at the time of publication, up 0.60% from the open. Tomorrow’s prediction sees support at $13.41 and resistance at $13.47. The predicted close for tomorrow is $13.41. Vector figures show -0.02% today, which turns +0.27% in one trading sessions.  Prediction data is uploaded after market close at 6 p.m., CST. Today’s data is based on market signals from the previous trading session.

Gold

The price for August gold (GCQ8) is down 0.05% at $1,302.40 at the time of publication. The commodity traded higher, breaking the psychological $1,300 barrier, before dropping back below it as the market closed and the interest rate hike from 1.75% to 2.00% was announced, causing the dollar to rise in late afternoon trading.

Using SPDR GOLD TRUST (GLD) as a tracker in our Stock Forecast Tool, the 10-day prediction window shows mostly all positive signals. The gold proxy is trading at $123.15, up .27% at the time of publication. Tomorrow’s predicted low is $122.61 and the predicted high is $123.15. The predicted close for tomorrow is $123.14. Vector signals show -0.09% for today, reaching -0.32% in three trading sessions. Prediction data is uploaded after market close at 6 p.m., CST. Today’s data is based on market signals from the previous trading session.  

Treasuries

Two-day Fed meeting which resulted in the second of an expected four interest rate hikes this year caused yields to spike, those include two, five, ten, and thirty-year bonds. The yield on the 10-year Treasury note is up 1.31% at 3.00% at the time of publication. The yield on the 30-year Treasury note is up 0.63% at 3.12% at the time of publication.

Using the iShares 20+ Year Treasury Bond ETF (TLT) as a proxy for bond prices in our Stock Forecast Tool, we see mostly negative signals in our 10-day prediction window. Today’s vector of -0.15% moves to +0.18% in five trading sessions before returning to negative territory. The ETF is priced at $119.245 at the time of publication, down 0.08%. The predicted close tomorrow is $117.84 with a low and high of $117.74 and $119.23, respectively. Prediction data is uploaded after market close at 6 p.m., CST. Today’s data is based on market signals from the previous trading session.

Volatility

The CBOE Volatility Index (^VIX) is up 2.51% at 12.65 at the time of publication, and our 10-day prediction window shows mostly all negative signals. The predicted close for tomorrow is 12.78 with a vector of 4.37%. The predicted lows and highs for tomorrow are 10.85 and 13.99, respectively. Prediction data is uploaded after market close at 6 p.m., CST. Today’s data is based on market signals from the previous trading session.