As expected the Federal Reserve ended the current round, round three of quantitative easing. Volume ran hot throughout the session and picked up its pace after the Federal Reserve announcement. Post announcement the usual volatility dance the market does happened once again. Just after half past two we did see some buying sneak in and the market lifted higher into the close. There was not enough buying to push the market into positive territory by the close. The good news is the market digested the news of the Fed ending QE pretty well for now. Of course we have the rest of the week and the course of action will be dictated how we proceed. If this market wants to go higher we need to consolidate the recent gains. Was today the start?
A real issue we have is how leading stocks look when compared to mid-September. Do they look better now? They do not and two stocks are certainly TSLA and FB. TWTR is another leading stock stumbling after earnings. GOOGL and NFLX continue to look extremely weak. Sure, content creators go to NFLX first and that is nice to know. However, price action of the stock simply does not care what Mark Cuban says about the stock. Everyone wants a story to go with their stocks. It makes them feel comfortable. It is much like a small child being read to at night before going to bed. Do you want a bedtime story to make you feel better or do you want to get after monster stock gains?
Where we go from here is anyone’s guess, but we do know there is a lot of work to be done before we can move higher. These V-shaped moves are dangerous and need time to digest before pushing higher. The lack of leaderships is quite concerning and we will need to see more stocks setup within bases to have conviction on the long side of the market. We have some longs working, but we do not have a ton to choose from. Stay patient and attack when the opportunity presents itself.
We now are in a new era where there is no QE. There is always the possibility of a QE 4 rumor though. Shorting will be dangerous until QE is viewed as a negative. Stay tuned.
