What a wild day in the markets. Prior to the Fed announcement the market caught a bid. For a while from 2:04pm EDT to about 3pm it appeared as if we were going to rocket higher. The NASDAQ cleared its 200 day and then 50 only to see those gains evaporate in less than an hour. Volume was up across the board by a double digit margin. The big question now is whether or not we are setting up for another leg down or not. The odds still favor us returning to the August lows at least one time. Anything is possible, but stick with your game plan and try not to think about the direction of this market.
It is possible we make a turn and run higher. There is always that possibility. At the moment, from the surface a reversal like we saw with volume surging certainly indicates weakness. The “why” doesn’t matter because it sometimes it takes weeks and sometimes months later. And when the “why” does reveal itself it is usually too late. This is why we stress to always adhere to your trading strategy. If your strategy has you long then be long. As long as you know where your exits are then why worry? We are mostly cash as a lack of signals does not have us long many names. Stick with the plan.
While we could go on a victory parade regarding the Fed NOT hiking rates it is completely worthless. Besides, odds were the Fed was not going to raise. Treasuries were indicating a 30% chance of a rate hike. Now, the highest odds of a rate hike will be in December. Our next two meetings are in October and December. We still contend it will be very hard for the Federal Reserve will raise rates. They are boxed in without an exit strategy. Even Ray Dalio believes we will get a new round of QE. Not that crazy when you really boil it down. All this Fed knows is how to print money.
Tomorrow we see a quad witching Friday! Just a day after the Fed we get another inflated day due to options expiry. Volume will be artificially inflated.
Have a great weekend!
