Major averages closed mixed on mixed volume even though Friday was options expiration day which tends to exaggerate volumes. The NASDAQ Composite was able to regain its 50-day moving average which would now serve as a reference point for support given that futures are indicating a sharp upside open.
The markets and central banks have remained stuck in a quagmire as numerous cross currents create uncertainty, without being able to develop any definitive trend. For example, the European Central Bank made no changes to its interest rate policy while President Mario Draghi made sure to avoid any specific references to either tapering or extending the purchase program before March 2017.
Central banks are starting to realize negative interest rates are a poor solution so their hands are tied as the global economy would have to show genuine signs of recovery, or any tapering of QE could topple this house of cards. Likewise, when the Fed hikes rates again, it will be the second time they have done so since 2006. History shows that past market bubbles burst as a result of premature rate hikes by the US Federal Reserve. This time, however, the Fed and other central banks may have little choice. They are "damned if they do, damned if they don't". Perhaps it is only a matter of time.
Renewed strength in big-cap names such as GOOGL, MSFT, NFLX, and QCOM suggests that some QE capital may be finding a home in such names. If the Fed at some point says they will buy stocks as part of a new form of QE, big-caps will be the direct beneficiaries. Futures are sharply higher this morning as a result of the upswing in merger activity and strength in European bourses on strong PMI data.
On the Fed front, New York Fed President William Dudley is expected to give opening remarks at 9:00am ET, Fed Gov. Jerome Powell is scheduled to moderate a panel discussion at the same conference at 1:45pm ET, St. Louis Fed President James Bullard is due to present at 9:05am ET to the Association for University Business and Economic Research, while Chicago Fed President Charles Evans will give a speech at 1:30pm ET.
Expect more of the same verbal tightrope-walking with regard to the timing of the next rate hike.