Watch for Reaction to Fed Meeting
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Markets, almost effortlessly, have
bounced into resistance zones. It feels like sellers have taken a
powder since last Wednesday’s positive reversal day. Reversals like last
Wednesday serve to wash out all sellers as support was taken out intraday before
the market turns back up. We have taught you throughout the years that this
usually leads to upside testing.
There is one glaring problem…and I am sure you are not
hearing this for the first time. There continues to be a clear lack of
conviction on the rallies as volume has been a joke on the up days. All in all,
it is not a positive to see low volume rallies and high volume drops. Normally,
the outcome is not bullish. But there is nothing normal about this market and
its ability to shrug off weakness…so we give it a chance. We give the market a
chance to have a follow through day to let us know the correction is over and we
have a confirmed rally.
Despite the low volume, there are definitely a few positives
showing up. I am starting to see a decent number of leading stocks reassert
themselves as the new high list starts to expand. Leading stocks breaking out is
sometimes a precursor to strong action in the market. Time to watch closely.
That leads me into Wednesday. The good ole Fed is meeting with
their yapping coming at 2:15. I gather they will keep rates steady. It is what
they say that will matter. Be rest assured that they will continue to say
everything is fine. They will say HOUSING is stabilizing for the hundredth
time…even though they told us HOUSING wasn’t a problem 18 months ago. They
will say subprime lending will not affect anything even though they told us
months ago subprime wasn’t a problem. They will tell us everything is perfect
and life is good. That’s all well and good because one expects for the pom-poms
to come out again but I will be looking for the reaction. If the market follows
through off their words, so be it. If it tanks, we will deal with that also. The
market is back into resistance zones on light volume. I believe we are near the
point that the big money crowd will need to stand up and show they mean business
with their buying. Should be an interesting last couple of hours Wednesday.
Ready for anything.