Advance retail sales were much lighter than expected, but the news failed to bring down futures in pre-market trading. The market was awaiting news from the Federal Reserve at 2:15pm EST. Volume was light heading into the meeting as institutions once again on the sidelines. Despite the more than 23% jump in volume on the NYSE volume on the S&P 500 was below average. A similar story on the NASDAQ, but volume was just 5% under the 50 day average. While volume was below average price action here is decidedly negative.
The common thought here was the Federal Reserve would step up and go for another round of quantitative easing (QE3). It has been obvious the markets were looking for the ECB to monetize the debt in hopes it would save the Euro. Keynesian thinking would lead you to believe pumping, printing money would provide the necessary backstop to help the economy. Unfortunately, the real medicine is slashing spending and running surpluses rather than deficits. Take a look at Greece, their budget deficit is running 5% higher than expected! Can you trust a politician who says they can reduce a budget deficit let alone a budget surplus?
The question here for many traders is what to do here. Trend following removes the “opinion” aspect to trading and you follow your trading strategy. It is what we are doing here. Emotions are removed in our decision making process as we know it clouds judgment and leads to costly errors. Disciplined investing with a set of rules is the way to prosperous trading.
As mentioned in last night’s commentary there is a story happening behind the move in the Shanghai Composite that has YET to be told by the market pundits. We’ll see if the index can rebound here, but there is something seriously wrong in China if their main composite stock index is hitting 52 week lows. It is something to watch over the next coming weeks. Although volume has been below average, it picked up yesterday. Pay attention, fireworks may be magnificent.
Stick with your game plan and cut your losses when necessary.
