Good Tuesday afternoon, one and all. How was your next-to-last day before interest rates edge higher? The market was sure digging the prospect, more excited about the upside of a higher Fed Funds rate than the adverse impact it may have. That is to say, investors are expecting the economy to roar sooner than later, and it's better to nip inflation in the bud than it is to let it run rampant.
We'll look at the matter in detail below. First, I want to congratulate those of you who capitalized on my mistake from Friday and acted on the trade recommendation -- a short trade on Lifeway Foods (LWAY) -- I was trying to deliver to Under the Radar Mover subscribers. That trade's up about 9% now, which isn't bad at all for a couple of days work.
If you didn't read anything we delivered on Friday, then you have no idea what I'm talking about. Here's the Q&D catch-up.
On Friday, in something of a flu-stupor, I inadvertently e-mailed the Under the Radar Movers newsletter to the people who are actually signed up for the free end-of-day newsletter you're reading now.... which is pretty amazing, really, since we have safeguards to prevent that very thing from happening. (My misery was at its height then; I'm feeling much better now, thankyouverymuch.)
As you may have surmised, that day's trading idea for URM members was a short trade, or a bet against, Lifeway Foods.
Sure enough, LWAY shares have spent the last two days getting hammered, just as we suspected. The stock's down 9%, which means that trade would be up 9% for those who took it.
My mistake ended up working out pretty well for everyone.
Here's the thing... that kind of move is nothing unusual for the Under the Radar Movers portfolio. The newsletter dishes out about five swing trades a week, and a whole lot of them move that far, that quickly. The best thing about it is that the service can play both sides of the market well, betting against stocks when the time is right, and betting on stocks when the time is right. It's this kind of flexibility that lets URM members keep making forward progress even when the market is losing ground.
So, with that being said I'll just propose this idea to anybody who pulled the trigger: Any money you made with the Lifeway Foods trade is essentially free money. Why not invest that money in a subscription to the Under the Radar Movers service and start getting trading ideas like that one every day? It would essentially cost you nothing.
Either way, we do want to make sure you know we're not going to issue any kind of exit alert or stop-loss alert for LWAY here in the newsletter you're reading now. That really is going to be reserved for Under the Radar Movers members. So, if you need that guidance, you do need to sign up. Here's the deal.
Market-wise, why do I feel like this is all a big "buy the rumor, sell the news" setup?
The news, of course, is the inevitable rate hike tomorrow. And if for some inexplicable reason Janet Yellen doesn't ratchet rates higher on Wednesday, that may well lead to an even bigger implosion.
Whatever's coming, take a look at the chart of long-term bond yields and the U.S. Dollar Index. The dollar was up a bit today, while rates were down quite a bit. This arguably says investors have already priced the advent of a higher Fed Funds rate into the bond market, even if it's not fully reflected in the value of the dollar.
In fact, it wouldn't be wrong to entertain the notion that maybe the bond market got a little ahead of itself when it was pricing in what will likely be a rate hike on Wednesday. I've got a nagging feeling that's what happened.
It more or less jibes with my other fear that stocks are overbought at this time, and traders are just waiting for an excuse to take profits. It doesn't even have to be a logical one - it just has to be one. Either way, if rates peel back starting tomorrow and the U.S. dollar moves with it, that's going to boost gold and boost bond prices, which inherently works against stocks... and you don't need me to tell you this rally is getting a little long in the tooth, and has already been uncomfortably uncontested.
Thing is, I'm not willing to stick my neck out and be the first one to test the theory... even though I'm leaning in this direction. (I'll be the second person in line though.)
Last but not least, just a reminder that featured stock Viva Entertainment Group (OTTV) is hosting its launch party and press event this evening, in Miami. It sounds like it's going to be quite the shindig, but more than that the event is going to preview exactly what its over-the-top television platform is and how it works. Once people see it in action, it's the kind of thing with the potential to spread like wildfire. Don't be shocked if OTTV shares really start to take on a life of their own come Wednesday.
In the meantime, the company continues to assemble a very impressive leadership team, today announcing it had added Rory Conaway to its Board of Directors. Matthew Briar has the scoop on Conaway right here.
That's it for today, folks. Check back in tomorrow. We have no doubt the interest rate decision and media coverage is going to make for a very interesting day, and is going to force the bulls and the bears to put up or shut up.