{"id":19485,"date":"2022-03-08T07:30:06","date_gmt":"2022-03-08T12:30:06","guid":{"rendered":""},"modified":"2022-03-08T07:30:06","modified_gmt":"2022-03-08T12:30:06","slug":"the-biggest-trader-in-the-room-controls-the-narrative","status":"publish","type":"post","link":"https:\/\/jeffclarktrader.com\/market-minute\/the-biggest-trader-in-the-room-controls-the-narrative\/","title":{"rendered":"The Biggest Trader in the Room Controls the Narrative"},"content":{"rendered":"

The stock market notoriously trades on narratives…<\/p>\n

There’s a lot of news-based market action that starts off grounded in reality.<\/p>\n

But eventually, it gains enough traction where it’s widely accepted as the truth by investors.<\/p>\n

So, they get too comfortable… And it’s usually right before the top or bottom.<\/p>\n

In the blink of an eye, a new narrative emerges – rendering the old one obsolete.<\/p>\n

It’s the reason markets fluctuate.<\/p>\n

And it cuts both ways…<\/p>\n

For example, greed creates a slow and endless bull<\/a> market like we had last year… That was followed by a sudden shift in investors’ perception.<\/p>\n

Now the trend is fear… causing wild selloffs like we’re seeing now. <\/p>\n

It’s similar to what I described as the “hype lifecycle” a few times last year.<\/p>\n

That’s when I called out the hype on things like Robinhood (HOOD)<\/a>, and Virgin Galactic (SPCE)<\/a>.<\/p>\n

The way we did it was simple… The data told a very different story from the market – the hype became removed from reality.<\/p>\n

Right now, I’m noticing the same thing… but in reverse. Although, this time the shift is more subtle.<\/p>\n

Below are a couple of big themes the market is trading on right now. There are a few counter points in the data that make me question the certainty of recent selloffs.<\/p>\n

The War in Ukraine<\/h2>\n

The human tragedy this war has created is real.<\/p>\n

Millions<\/em> are now displaced, and thousands have been killed. And with each passing day, the news gets worse… igniting regular 1-2% intraday selloffs.<\/p>\n

Despite the worsening news, the market is off its year-to-date (YTD) lows set on February 24.<\/p>\n

I believe this war (at least in its current form) has already been priced into the market.<\/p>\n

It’s not just because the market isn’t making new lows… It’s because – as Goldman Sachs has stated – this conflict poses “limited” effects to the U.S. economy.<\/p>\n

The real economic threat is in Europe, since they depend more on Russia than the U.S.<\/p>\n

The U.S. is a net exporter of natural gas, with its own oil and wheat.<\/p>\n

The bigger effect on our markets is what will transpire on March 16 in Washington…<\/p>\n\n\n\n
\n

Free Trading Resources<\/strong><\/p>\n

Have you checked out Jeff’s free trading resources on his website? It contains a selection of special reports, training videos, and a full trading glossary to help kickstart your trading career \u2013 at zero cost to you. Just click here<\/a> to check it out.<\/p>\n<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n

Beware of the Biggest Trader in the Room<\/h2>\n

Up until February 11, the only narrative dominating markets was the Fed’s hawkish pivot.<\/p>\n

But war headlines hijacked that narrative with something even more bearish<\/a>… Underneath the headlines is a market that’s starting to price in less<\/em> rate hikes than they were on February 11.<\/p>\n

Before the war, the market was convinced the Fed would raise at least 50-basis points at the March meeting. But when the headlines broke out, the expectation of a “shock and awe” rate hike started to dissipate.<\/p>\n

The chart below shows what the market thinks the Fed Funds rate will be as derived from the March Fed Funds futures contract…<\/p>\n

\"Chart\"<\/div>\n

As you can see, before the war broke out, the market was anticipating at least a 50-basis point hike… but now that expectation has been cut in half.<\/p>\n

If the market was worried about runaway rate hikes, then this chart is starting to show the opposite.<\/p>\n

Which could only mean one thing…<\/p>\n

The Market Is Due for a Narrative Change Soon<\/h2>\n

I wouldn’t be shocked by a big relief rally on the horizon. It’s just the way of the news cycle…<\/p>\n

I suspect once the focus shifts back to interest rates – coupled with some handholding from the Fed – the market will “magically” find value in a lot of beaten down sectors.<\/p>\n

Given everything that’s happening, I don’t think the Fed wants to raise rates too much right now.<\/p>\n

A small 25-basis point rate hike on March 16 – coupled with the type of dovish “Fed-speak” we have grown accustomed to – may set off a rally to retest the 4450 area sooner rather than later.<\/p>\n

I’m not overly bullish and calling for new all-time highs, I’m just looking for a shift in market psychology.<\/p>\n

There’s nothing like a nice market rally as winter turns to spring.<\/p>\n

Regards,<\/p>\n

Eric Shamilov
Analyst, Market Minute<\/em><\/p>\n

<\/p>\n

Reader Mailbag<\/h2>\n

In today\u2019s mailbag, Jeff Clark Trader<\/em> member Jay comments on Jeff\u2019s recent essay<\/a> on not letting emotions cloud your judgment\u2026<\/p>\n

\n

Thank you for this very profound thought. Also, thank you for all you do to help us in this very difficult market.<\/p>\n

– Jay B.<\/strong><\/p>\n<\/blockquote>\n

Thank you, as always, for your thoughtful comments. We look forward to reading them every day. Keep them coming at feedback@jeffclarktrader.com<\/a>.<\/p>\n

<\/p>\n","protected":false},"excerpt":{"rendered":"

This cuts both ways…<\/p>\n","protected":false},"author":49,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"ep_exclude_from_search":false,"service":"","footnotes":""},"categories":[1],"tags":[],"publication":[10],"person":[13],"newsletter-type":[],"ticker":[],"class_list":["post-19485","post","type-post","status-publish","format-standard","hentry","category-market-minute","publication-market-minute","person-eric-shamilov"],"acf":[],"ai_tts_audio_outdated":false,"ai_tts_legacy_post":false,"_links":{"self":[{"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/posts\/19485","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/users\/49"}],"replies":[{"embeddable":true,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/comments?post=19485"}],"version-history":[{"count":0,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/posts\/19485\/revisions"}],"wp:attachment":[{"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/media?parent=19485"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/categories?post=19485"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/tags?post=19485"},{"taxonomy":"publication","embeddable":true,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/publication?post=19485"},{"taxonomy":"person","embeddable":true,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/person?post=19485"},{"taxonomy":"newsletter-type","embeddable":true,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/newsletter-type?post=19485"},{"taxonomy":"ticker","embeddable":true,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/ticker?post=19485"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}