In today's Action Alerts PLUS Daily Rundown, Bob Lang discusses why club members should keep a keen eye on emergency action out of the Bank of England.
He also discusses Apple (AAPL) after a Bloomberg report concerning iPhone production triggered a selloff in the stock.
So we have our eyes right now on the Bank of England, which surprised markets earlier this morning by announcing a temporary long dated purchase of their bonds, which is called the Gilts to help stabilize the pound. And as you may recall, just two days ago, we saw the pound plunging on some heavy selling and shorting of this currency.
And this is similar to a move that we saw quite often during the great financial crisis back in 2008 and 2009, where a central bank senses panic with a sharp drop in a currency, and then does an about face with policy. This time, though, the bank has decided against their plan to sell Gilts, which I believe is going to actually start up in a month or so.
So this is just a short term panic move by the Brits. Selling the Gilts, of course, is their version of QT. And they turn it around, and decided to buy bonds, instead, in order to stabilize the currency. So that, basically, instead of doing a pause in their potential policy of quantitative tightening, they went ahead and went even further and started a quantitative easing program, at least, for temporarily to help stabilize that British pound.
It is these interventions, though, that will often lessen confidence, rather than bolster it in investors and traders, causing more selling to ensue in short order. Now why should we care about this as a central bank move when it really has nothing to do with what the Fed is doing and when, in fact, we really need to pay attention to other central banks along with the Fed?
Banks basically around the world are moving policy to be more in line with the Fed. Its monetary goals, which is an aggressive push towards restrictive policy. We must be cognizant, though, of all the banks that make whatever moves they decide to do.
Just recently, we saw Sweden raised interest rates 100 basis points. And even England came in with a very, very large rate increase before the pound took it on the chin earlier in the week. We are always wary of this, as they will lead oftentimes to the Fed doing the same thing, or, at least, for some time to come.
So what does this all mean for the markets? Basically, plenty and more volatility to come. We've seen it already this morning. And head scratching moves, such as this one from the Bank of England.
We have seven Fed speakers lining up. In fact, in a couple of minutes, we'll be hearing from Chairman Powell. Will be making a speech and probably answering some questions. I'm sure somebody is going to bring up this bank of England move to Chairman Powell to see what his thoughts are on that.
I suspect some, if not all, will comment at some point in time during the day on this Bank of England move. But once again, seven Fed speakers. Today is a pretty big lineup of speakers.
But to basically put the market into context here, we've had really, really poor breadth. And this is really what I want to focus on here. It's been horrible lately. And it's on a sell signal. We are pretty well oversold here on the markets, on the oscillators.
Put/call ratios are spiking. Volatility is up over 30%. And, again, the breadth levels are just atrocious. And what is that telling us? It's indicating that institutional selling has been taking place.
And what is institutional selling? These are the big hedge funds, and mutual funds, pension funds, banks, and so forth that are just selling stocks indiscriminately. And, perhaps, they're piling into bonds. Perhaps, they're piling into those two year yields that are selling and paying off at 4% or more.
It's this heavy selling and bearish price action, though, that has put those oscillators that I talk about quite often into a deeply oversold condition. And we could always expect a snapback rally if they happen at any time. This is what we're looking at yesterday.
But, of course, it failed miserably as the more comments about hawkish policy came out during the trading session. But with volatility so high and conditions so tepid right now, we don't see these rallies lasting for too much longer, again, as we noted about yesterday.
And finally, we have an iron Apple, after there's a report in Bloomberg saying that they were-- the smartphone maker, excuse me, maybe cutting overall iPhone production. It appears Apple may be cutting that on this version of the phone, which is the 14, which would be a huge negative for all markets, if true.
We haven't heard from the company, yet. But these reports are often taken with a grain of salt, until the company comes out. They're pretty much in a quiet period, until the earnings come out later on in October.
High anxiety, though, with these rumors, and stories, and so forth with Apple and other big companies. And it's going to raise a lot of doubt and a lot of worry in the markets. And volatility, being what it is right now, people are scared and worried that the markets are going to take another leg lower.
We'd like to tell subscribers just take a pause. Take a step back here. Let's not panic and sell any Apple or anything else right now. We have a great deal of cash. We do have some inverse ETFs that'll help us cushion the blows from big sharp moves down in the markets.
And we're picking up new names, as we speak and adding to plays, as well, too. We're in it with you, all of you guys together. And we hope that before the end of the year, we'll have some positive things in the markets and in trading, as well, too.
So, again, don't panic. And if you feel you need to do a little bit of selling by all means, don't let anything stop you from doing that, just from lining up and raising some cash. That's going to be it. Have a great day everyone. And we'll see you on Thursday.