The day started off with disappointing housing data coming in well below expectations. After the release of the housing the data the market simply drifted lower ahead of the FOMC rate decision. Clearly the biggest news of the week came at 2pm EDT when the headline coming from the Fed did not include a taper. Immediately the market jumped on the news and closed just off the highs of the session. The S&P 500 lead all major markets higher closing with gains of 1.14%. The Dow was the laggard among major market averages. Volume jumped above average on the day as plenty of market participants jumped into the market. Today was a prime example of not fighting the trend and riding the trend is the only way to trade.
It is clear the Federal Reserve Bank of the United States thinks the US economy is so fragile it can’t even taper its bond buying program. As far as the market goes we simply follow price and do not attempt to predict moves in the stock market. However, five years after the collapse of Lehman Brothers it is a sad story this economy with the all Fed stimulus we can’t survive without it. Or is it the Reserve Bank is afraid of the volatility following the unwinding of QE. We’ll certainly take advantage of the situation as we saw today. The market was giving off all kinds of signals the Fed would not taper. Just ride the trend.
Big moves outside of stocks were seen in the 10 year and 30 year Treasury bonds. Gold, Silver, and Crude Oil had big moves today with Gold moving more than 4% on the taper news. Miners rallied too and many of them look great off their most recent lows. Other moves in Junk bonds highlighted by HYG and JNK show there will be an appetite to target yield once again. Utilities were the number one gainer on the S&P 500 today as a sign a reach for yield once again will be on the front burner.
The one downside here is the market has moved quite a bit without consolidation. We can stay overbought for a long time, but it is something to keep an eye on. Stick with the plan and ride your winners.
