Tuesday was a virtual replay of Monday’s market, with the exception of the internals at the close. We opened and ran up 105 in the Dow and 12 in the S&P500 and spent the entire day “inside” yesterday’s range. These inside days are generally thought to be meaningless as they make no progress in either direction, but the reversal of the internals might give a hint to the coming direction. While we started with 2:1 adv /dec and volume by the end of the day we were 3:2 with the decliners well ahead.
The problem here is that the market has become highly news driven and between the close today and the close on Wednesday we will have both the Bank of Japan and the Fed make what may be market shaking announcements. We have taken a couple of profits this week and I have some very specific thoughts (not necessarily the right ones, but mine nonetheless) about both of these groups. First of all, the B of J hasn’t done anything right since 1990, so I’m pretty certain whatever they do will continue to be ineffective. The Fed has lost its credibility by moving the finish line and failing to raise when it has had the opportunities. I think that several of the financial markers that they rely upon are pointing to a rate rise and I am willing to take a portion (roughly half) of those profits mentioned above and take a chance on a “low probability / high impact” action by the Fed of raising rates or making a hawkish statement. If that were to happen, I believe that we could easily see a decline of a couple of percent. We’ll see
In the morning after the B.of J. decision and by 2:01PM…CAM
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