Will the Fed taper and by how much is the question on many people’s mind. The market roared back after yesterday’s reversal in heavy volume. It was not a surprise today’s volume figures were light as many are hesitant to do anything in front of Wednesday’s conclusion of the FOMC meeting. Trend followers are simply going about their business completely ignoring the nonsense being pumped by the financial media. Early in the day the government released their reading on inflation showing it was quite tame below expectations. Homebuilder sentiment came in as expected, but continues to run much hotter than reality. When we boil it all down the market turned higher and continues to act bullish since the August lows. The trend is our friend and until we get enough evidence it has reversed we remain positioned for more highs.
Expectations for the Fed are simple. Taper will be the Fed lowering the amount of asset purchases between $10-20Bln. The split between Treasuries and Mortgage securities will be something to watch for, but overall the market seems to be telling us it won’t matter. Bond yields ticked lower, but remain elevated and have told a much different story than stocks. Bonds have priced in the effect of a taper, yet stocks seem to have ignored the pending doom that many have said it would. Trying to figure all this out must give those who try one giant headache. The fact remains we have yet to see enough evidence of a reversal. In time will, but for now it appears we will continue to march higher.
Leading stocks continue to act well. FB tossed a giant middle finger to those who sold on Monday finishing higher by 6% and above $45. There is nothing but blue sky as the stock sits in all-time high territory. YELP is another leading stock to act well today. There are countless others acting well and it would be a cardinal sin if we didn’t follow their price action.
Just after 2:00 pm EDT we’ll get the release of the FOMC rate decision and whether or not they taper. It should bring fireworks and will be quite entertaining. We’ll enjoy the action. Come join us in the Big Wave Trading Chat room to enjoy our view.
