MLR - PMP 9/22/14
Major averages fell on surging volume due to Friday's quadruple witching. Even though the Fed plans to keep rates at unusually low levels for a prolonged period, when rates do start to rise, the stock market will not necessarily endure a steep correction or bear market. Rising rates should be less of an issue as long as that rise is due to genuine economic growth. But this is will be the key question sometime in 2015.
In general, as the "3 steps and a stumble" saying goes, as rates start to rise, this is usually an indication of new growth in the economy. Eventually, as the economy continues to grow, the Fed has to hike rates to slow an economy that could overheat, so traditionally, the third rate hike causes the market to stumble, as the Fed tries to cool down the economy. Of course, this is just an aphorism that should not be taken literally but merely as a rough guide at best.
Hot new IPO Alibaba (BABA) began trading Friday, gapping up 38% above its offering price. Investors should not just jump in no matter how strong the fundamentals appear to be, but take a wait-and-see approach to how the technicals unfold in the coming days and weeks. Should an actionable buy point present itself, we will send out emails to members as usual. And investors should also take note of the caveats discussed about the stock's fundamentals as well.
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