Day four: our potential US Tech 100 trade

The Tech 100 Cash (NASDAQ) rallied strongly after the FOMC minutes at 4am AEST.

Once again the market assumed one thing and the central bank meeting didn’t oblige.

Logically the minutes should have been hawkish given they were expanding on the original FOMC statement, but clearly the minutes were designed to push back on rate hike expectations. There seems to be a fairly prominent message from the Fed – rates will go up, but not for a long time.

The market focused on the line that ‘several participants noted that the increase in the median projection (for interest rates) overstated the shift in the projections’. US bond yields actually rose, however what was interesting was the fed fund futures (December 2015 contract) fell four basis points (bp), to 70 bp. This highlights the lowering and re-pricing of rate hike expectations in the US.

US markets took solace in the fact that rates will be lower for longer and that the Fed is trying to clear up any confusion around rate hikes. At the end of the day the market has priced in an end to the Fed’s bond buying program and everyone seems comfortable with that, however it seems investors are just not ready for a marketplace where interest rates are going to go up anytime soon.

Having taken profits on my earlier position, yesterday I looked at re-selling strength in the US Tech 100 Cash, looking for a rejection for the former uptrend. Clearly the bulls were in full control and the index closed back above this trend on good volume. Short positions look tough going right now.

US Tech 100
US Tech 100

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