The market rebounds from the end-of-the-week selling from last week. Early going was solid after positive economic data helped boost the market. Homebuilder sentiment crept higher from February’s reading, but was below economists’ expectations. Resistance was hit just after the release of the NAHB figure and buyers weren’t able to challenge those highs for the rest of the session. The final hour of trading was won by sellers pushing the market back towards the morning lows and opening prices. Volume was well off from Friday’s levels as many institutions are likely waiting for Janet Yellen’s first Federal Reserve meeting to adjourn. The weak close was not promising for this market to turn around just yet and we’ll wait for confirmation of either further downside or a reverse back to an uptrend.
Today’s move did push the overall market from oversold conditions, but the move wasn’t inspiring. Small caps lagged for the session and the lack of volume provided us with clues this move today has a better chance of rolling over. Utilities lagged today, but the group continues to show interest another clue we are seeing money rotate into defensive sectors. Anything is possible here and as we have come off the highs set recently we are set to move with the market. A move lower or higher we are prepared to maximize our gains. Are you?
Given we have a rate announcement from the Fed on Wednesday the likelihood of a major move ahead of the meeting is unlikely. Trend followers simply do not care if there is a Federal Reserve meeting or not. What we care about is how the market reacts and if our price signals trigger any moves. Sure we see volatility pick up on Fed days and will lead us into portfolio moves, but it is not set in stone we have to do something. We won’t get into a guessing game either as many will likely do with the Federal Reserve. For now, we know the taper is on schedule and will end the latest Quantitative Easing program in October. If the Federal Reserve changes course; are you 100% certain the direction of the market? What happens if the market goes against your thesis? When do you get out? A solid process is needed to answer these questions.
Welcome back from the weekend! We hope you were able to get out and enjoy your time away from the market. Stick with the plan!
