The Federal Reserve meeting minutes showed the Fed’s focus is not ending QE but when the next rate hike will come. Janet Yellen will now try to take the focus off of QE and keep the narrative on interest rates. Initially, the market did not like what it saw from the Federal Reserve minutes and it appeared the market was about to go the way of the prior two days. Buyers came in and saved the day pushing the indexes back to their highs of the session. Volume was off quite a bit from Tuesday’s session as many were left licking their wounds. Today’s rally doesn’t come as a surprise after the past few days, but it did enough to hold off what could have been a decent decline. The pivotal point will be today’s low and it will need to hold if we are to see this market move to new highs soon.
This market loves to climb the ladder on lighter volume and we saw it once again today. Even with the Federal Reserve meeting minutes, volume couldn’t make its way to Tuesday’s level. There are many reasons for this to occur, but we know it occurs. Upside volume on the indexes simply do not matter with Fed intervention. Price pays and following the trend has worked out quite well for us and we aren’t about to change course just yet.
Some of our leading stocks who were slammed the last two sessions were able to make some of the losses back. To clear the recent distribution it will take some time to repair the damage. Remember, the damage done in March took to May to repair. We aren’t suggesting it will take any length of time, but remain patient and allow leading stocks to setup properly once again. Do not try to force anything as you will simply overtrade your account leading to capital losses. Stick to the game plan and allow stocks to setup in proper buy points.
We now go on the hunt for when short-term interest rates will rise due to the Federal Reserve Funds rate hike. Sure, short-term rates may advance ahead of any rate hike and it is likely they might. However, given the language from the Fed we may not see this until 2015. Inflation could throw a monkey wrench into program, but it is something everyone and their mother will keep an eye on. For us, we’ll use the ultimate indicator: price.
