Stocks build upon yesterday’s gains, but volume slides ahead of tomorrow’s FOMC meeting conclusion. We are not about to argue with today’s price gains. Building on yesterday’s move off the lows is certainly good news. However, we continue to see this market inability to close with strength. While this is a mild complaint it certainly leads us to believe we are not going to see any follow-through to the upside just yet. It is good news to see small caps acting well as well as the NASDAQ. At some point we will need to see follow-through to the upside. Our bias remains to the long side of this market despite the numerous risks everyone is pointing out. Price is our master and we are simply following along.
The two most glaring risks are certainly Greece and a Fed rate hike. Eurozone leaders are simply grandstanding and will likely come to a compromise. Remember the fiscal cliff? A solution, no matter how illogical it may seem to Zero Hedge will likely be cheered as a good solution for the time being. Is this time really different then 2010? As for the Fed we do expect the rhetoric over a rate hike to remain the same. However, it is unlikely they will raise rates this year. The IMF has already asked for them to hold off. We are not going to try and predict how the market reacts to any of these risks as we will stay the course with our process. For now, we remain long with our exit strategy in place.
What many get wrong is the stock market does not care if you are right or wrong. Bragging rights do not mean very much when your account dwindles and loses money. Why not focus on the process rather than the outcome. You will have winners and losers, but by having many small losses and very big gains will be what move your account ahead. Would Babe Ruth hit as many home runs if he struck out less? So long as you cut losses and ride your winners success will follow.
Tomorrow will certainly be entertaining post FOMC statement release. We typically get fireworks just after the release. There are the HFT firms who get it a few nanoseconds early, but for the most part all the action takes place after 2pmEDT.
The question will be whether or not we see follow-through tomorrow. Until then have a great night.
