SUMMARY:
- Stocks drift higher on low volume ahead of Fed.
- Construction spending hits a record.
- National manufacturing slows but still a solid pace.
- EU typifies US trade problems as its manufacturing contracts.
- SP500 rises to key resistance point, trying to set up for a follow through.
- Fed dominates market psyche as investors weigh slowdown and Fed versus future economic progress.
Stocks hold gains in volatile, low volume session.
For the first session in five volume did not climb past the prior session trade. With the sharply lower and below average volume, stocks were subject to some volatility, and they did not disappoint. Some upgrades in chip equipment overshadowed downgrades of the major brokerages, and stocks were set to open higher. They rallied on the open, but then started to waffle as oil climbed from the Friday sell off, moving back above $50/bbl (50.92 close). As oil rose stocks started to fall.
The construction data at 10ET shot stocks higher; a record level will do that. As quickly as they went up, however, they came back down as the ISM manufacturing report showed unexpected weakness. Still strong, but being that it is just before a Fed meeting and investors are viewing the Fed as a primary source of further slowdown, stocks lost their bid and turned lower. They sold the next four hours until SP500 tapped the 200 day SMA. That triggered some covering, and that snowballed into the close. When the bell rang everything but SOX was positive (-0.1%) with the small caps leading the way (1.3%).
Volume was low, typical ahead of the FOMC meeting, but with a follow through session still not in prime territory until Wednesday, no real complaints about the volume. Breadth was positive but modest; again no complaints. Leadership was solid with some good volume moves despite lower overall trade. This was classic 'drift' ahead of the FOMC meeting, and often that drift is higher.
Indeed it will likely drift higher Tuesday into the meeting itself, but there is a big and important resistance point immediately ahead: SP500 has rebounded to the neckline of its head and shoulders breakdown, the key point in the attempted double bottom rebound by the large caps. If the Fed says 'we are done' then you have a big breakout above that level. As that is not likely, most likely you get a test back from that level. How it rebounds from that pullback later in the week tells the story as to whether this nascent double bottom attempt has any staying power. |
