WEDNESDAY:
The Fed is history for the moment though we still have to see how the late revision to the statement impacts stocks. They rallied in the last few minutes on that news, but at that point it really looked as if some investors were grasping at straws. The skinny is that the Fed is going to keep raising rates for now with another 25 basis points locked and loaded. After that most likely at least one more according to the futures contract.
The market is now moving into the zone from Wednesday to Monday where it can show a strong follow through to the high volume rebound last Friday. That first move starts the rebound and then the pause allows buyers to regroup. If they come back into the market and buy in numbers, that shows sustained interest and gives the upside some legs. High volume, strong breadth, leadership surging, and clearing resistance with strong price moves are the hallmarks. SP500 is poised to deliver such a move, but as noted, it may take a day or two off before doing so (if it does at all) just to drive out the remaining sellers.
The move back up last week was a fight with the back and forth volume, but it held and the stage is set to try for a follow through. We note that a downtrending market will periodically attempt to reverse, set up a follow through and then fail. After all the Fed is still active as per its statement Tuesday, and oil, while closing below $50/bbl again, has to drop another $8 or so to make a really positive impact. Thus this could be another head fake, but we have to let it make its play.
NASDAQ looks weak as do many techs and much of the market, but there is still leadership that is holding up well, ready to take up the torch. It is up to the broad market to lead the way, and of course that means the big money has to be ready to buy. Even with oil still near $50/bbl and the Fed still raising rates, the upside move has to start somewhere, and the market starts its moves long before the underlying drivers are clear to investors. That is why we have to watch for signs of change such as shown the past two weeks and then see if they can follow through with real change. As always we will take what the market gives once the market shows its hand. |
