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I was featured on the 4 edition of the Intercontinental Exchanges new podcast series – called “Inside the Ice House” – (yeah not thrilled about the name -but that was not my call) – but the content of the podcasts is quite good – Josh King – VP of Communications at ICE – does a great job of creating the conversation.  You can find it at or follow the link below.

 I hope you enjoy it…….


The S&P closed at 2789.60 – So today’s circuit breakers are:

 Level 1.  194.57 pts (7%) or 2585.03

Level 2.  361.35 pts (13% total) or 2418.25

Level 3.  555.92 pts (20% total) or 2226.68


  And BOOM!  (Again) In a repeat performance investors couldn’t buy stocks fast enough…. The Dow soared 400 pts, the S&P was up 32 pts and the Nasdaq jumped ahead by 84 pts….and IT’S ALL GOOD AGAIN…….

 This week – It’s all about FED Chair Jay Powell….Today will be his first appearance on Capitol Hill since taking office at the Federal Reserve – in what is known as the Humphrey Hawkins semi-annual testimony. Just for background purposes – let me explain –

 “Humphrey Hawkins testimony – aka – The Monetary Policy Reports are mandated by the Humphrey Hawkins Full Employment Act of 1978, which required the Federal Reserve to formally report on its activities to Congress.  The Monetary Policy Report is delivered twice a year, in February and July, and reports the basic state of the US Economy and its financial welfare. Each report contains two sections. The first section summarizes past policy decisions and their predicted economic impact. The second section focuses on recent financial and economic developments” – Wikipedia

 And it is this appearance beginning today that has investors/traders and the mkts mesmerized as he is about to be tested – because since Jay was nominated and accepted Donny’s nomination back in November – so much has changed……We got very strong 1 qtr earnings, we got a $1.5 till tax cut, we have a fiscal stimulus proposal that is sure increase the deficit and then test the limits of the global appetite for US debt – more supply would mean downward pressure on prices and upward pressure on rates….. and we have seen volatility not only awaken from its long winters nap but we have seen how it cuts deep when you poke it…. And we have seen inflation begin to raise its ugly head in what may become known as ‘the Spring Awakening’…… (that was good, no?)

 Now here is the rub- for months and months – (if not years and years) we have been talking about 25 bps (¼ of 1%) moves in the Fed Funds rate as we try to ‘normalize’ interest rates in this country post the GFC (Great Financial Crisis). So far, we have had a total of 5 moves….and the idea was for at least 3 more moves this year – March, Sept & Dec – and that is all good. We are on the same page – right?

 Then Donny became President – Janet (former Fed Chair) got put to pasture and in walks Jay Powell – good guy, well educated, blah, blah, blah…. (no one is questioning his resume). But investors/ traders/ analysts/ strategists don’t really know yet how he will handle himself in his first ‘real public appearance’ since taking over the seat at the FED.  

 The WSJ hits the nail on the head this morning.

 “With interest rates remaining in focus, many investors said they would be watching closely for U.S. Federal Reserve Chairman Jerome Powell’s policy update to Congress on Tuesday, his first appearance on Capitol Hill since he was sworn in as the new Fed chief earlier this month.

 “We’re not used to listening to him the way we now need to, and how he chooses his words will be scrutinized by many market participants for the first time,” said Larry Hatheway, chief economist at GAM Holding.  How Mr. Powell articulates certain messages, his points of emphasis and his choice of language will be very closely watched, Mr. Hatheway said, as investors try to decipher his views on the U.S. economy and path for monetary policy.”  

 Bingo! And yesterday’s rally – another 400 pts on top of Friday’s 300 pt rally has now taken us back to within a nose hair of the January highs…. where we all were asking – “What is going on?”

 Yes I get that earnings are better, yes I get that the economy is turning the corner and yes I get that rates are going up and yes I get that we can expect inflation to kick in – but what I don’t get is that we have been talking about this ad nauseum, we have been defining what would cause the FED to become a bit more hawkish……..What they might be concerned about etc…so it’s not like investors are unaware – they are not…..but yesterday – the chatter started to move in a different direction……

 Word (rumor) has it that Jay is now willing to accept an inflation rate of 2.5% vs. the 2% target that we have had in our sights for a decade now……and do you realize what that small change of heart means???? It now means that the FED may NOT raise rates 3 times this year (never mind the 4 that caused all the hysteria 3 weeks ago) – that they will continue to ‘feed the beast’ by keeping rates lower for longer….and this sets the algo’s on fire…. Buy side algo’s kick in and the Sell side algo’s say – “Wait – why should I stand here – when the buyers are going to just keep paying UP for stocks….”.

 The fact that the system is so automated and fragmented allows for ZERO conversation among the players – everyone is afraid of making a decision because in the end the computers have been assigned to that task…. it’s like we take the brains out of our heads and just let the computers do the work…. Again, reminiscent of what happened during the Crash of ‘87…when portfolio insurance driven by computers models kept sending sell signals to the humans who refused to challenge the process…and in 6 ½ hrs the mkts lost 22% of its value……Is history repeating itself once again?  Except this time the move is UP and not DOWN so the level of angst is different – that is until it isn’t….Recall how the complacency of last year disappeared when the volatility spiked – sending the mkt down 11% in 4 days…….

 If the economy is as strong – as they tell us – then what is the issue?  Unemployment is now at historic lows (supposedly) at 4.1% and is expected to move into the 3’s sometime soon, wages are seeing upward pressure, oil is trading back in the $60’s, inflation is still sub 2%, central banks continue to serve up the Kool Aid and we still ‘CAN’T’ raise rates without someone throwing a temper tantrum?  Hello…. Is anyone home???  

 Because while investors may like the fact that the FED may only raise rates twice in 2018 – what happens when inflation really kicks in….and hits 2.5% and then 3.5% and then 5.5%?  Because you know that once it starts to go – there will be NO holding it back…. And remember – there is a whole generation and a half of people who have no clue about what it was like when inflation was rampant in the late ‘70’s /early 80’s.  Let me remind you…….in 1975 – inflation was 9.1% – then it did a head fake and declined to 5.8% in 1976 only to explode higher hitting 11.3% in 1979 (the year I graduated from high school) before hitting 13.5% in 1980!   And interest rates?  Oh right – they were 21%!   But hey…. what do I know?  

 Strap yourself in…. it’s about to get very exciting……

 European mkts were UP but have since turned lower and are now under pressure this morning as the show is about to begin……traders taking money off the table after the explosive moves higher over the past week…. makes sense – right?  We know how fast that can change…. Tomorrow – The EU will be putting forward their draft Brexit Treaty and on Friday the UK’s PM – Terry May is set to give a speech to her countrymen on what the UK” s relationship will look like with the EU.  There were no eco reports released that could be considered a mkt moving catalyst.   FTSE -0.16%, CAC 40 -0.04%., DAX -0.50%, EUROSTOXX -0.23%, SPAIN -0.27% and ITALY -0.07%.

 Oil is down 0.30 cts at $63.61- but has over the past 2 weeks rallied back from $58.50……as the Dollar index (DXY) remains essentially stable.   Oil is now testing some resistance right here at $64.50 ish….and if it breaks out then look for a test of the February highs of $68.88.  If it fails – then a move to support at $61.88 is next.  US inventories are once again expected to be strong and the US is set to become the world’s top oil producer in 2019 – leaving Vlad in the dust….

 Gold is steady at $1,330 ahead of Jay’s Capitol Hill appearance….

 US futures are DOWN 9 pts….in pre-mkt trading…again as the trader types ring the cash register after the two days 700 pt rally…. (This isn’t rocket science….)  as I think to myself – “Skies are blue and clouds are white….and I think to myself – What a wonderful world….”

 Take good care –  


 Bucatini with a Sweet Red Pepper Sauce

 1 lb. of Bucatini, Red bell peppers – washed and sliced thin, diced onion, garlic, olive oil, s&p, fresh basil, hot red pepper (opt) and plenty of Pecorino Romano Cheese.

This is simple

 Bring a pot of salted water to a rolling boil.

 In a large sauté pan – heat up the olive oil, sauté the sliced garlic, now add in the diced onions and sauté until translucent.  Now add in the thinly sliced red peppers and sauté until soft. Season with s&p.  When done – run ¾ of it thru the food processor to blend. Return to sauté pan and set aside.

 Cook the pasta al dente – maybe 8 mins…. strain and reserve a mugful of water. Toss the pasta into the sauté pan and turn heat to med – mix well – adding in half of the reserved mug of water.

Now add the fresh basil – some hot red pepper (opt) and plenty of cheese.  Toss and serve.  

 Buon Appetito

 “The market commentary is the opinion of the author and is based on decades of industry and market experience; however, no guarantee is made or implied with respect to these opinions. This commentary is not nor being it intended to be relied upon as authoritative or taken in substitution for the exercise of judgment. The comments noted herein should not be construed as an offer to sell or the solicitation of an offer to buy or sell any financial product, or an official statement or endorsement of O’Neil Securities, Incorporated or its affiliates”