Pilk realmoney.com tegemistele:
Rev Shark
The goal of Alan Greenspan and the boys at the Federal Reserve is clear: They wish to slowly, carefully and incrementally raise interest rates as the economy grows and inflationary pressures increase. They said they will move in a "measured" manner, which is an indication that there is likely to be a series of small interest rate hikes at some point, rather than a couple of big increases.
Our task now is to figure out how the market will react to the Fed's plan. Given that the market spiked and then gave back almost the entire gain following yesterday's news, it is safe to say that market participants are uncertain and a bit confused.
The major problem is that the Fed did little to remove the uncertainty that has been weighing on the market. It made it quite clear that it will eventually raise rates but left us guessing as to when and to what extent. Without knowing the timing and the degree, the market is left trying to figure out how to properly discount those moves.
The good news is that the Fed did sound very bullish on the health of the overall economy. Manufacturing activity is booming and job growth is showing signs of life. The question for market participants is to what degree a better economy has already been priced in and what impact inflation and increased interest rates will have on the market.
If it were easy to answer that question we'd all be sailing on our yachts in the Caribbean. We have to look for clues as to what the market is thinking. The best measure of market sentiment is the charts of the indices and they are worrisome. The big drop last week left us in a position where the bulls need to work extra hard to repair the damage. The bulls have been able to produce a little bit of a bounce the last few days but there was little conviction or vigor to the buying.
The Nasdaq is holding the 200-day simple moving average at 1935 but the downside support is precarious. The overhead resistance, on the other hand, is much tougher. The first major hurdle to the upside is the interim low between the two latest upside spikes at 1975. If the Nasdaq can cut through that level and hold the gain for a day or two it may be able to build momentum for another leg up.
Is that likely? I don't think the odds are good. There has been a marked change in character in the market in recent weeks. The list of new highs continues to erode, volume on the upside has flagged and there are few positive catalysts on the horizon now that earnings season is over. We also have seasonality to consider. Many folks have been wondering about the old adage, "Sell in May and go away."
If the bulls are unable to cut through at least some of the nearby overhead it is going to worry market participants and induce some selling pressure. The shorts will likely be emboldened if the bulls are unable to manage any decent upside progress.
I'm leery of the ability of this market to do anything substantial to the upside right now. We may see this bounce last a bit longer but I'd use strength to lighten up and/or do some shorting. Heavy overhead resistance looms and the downside support is thin at best. The risk is to the downside here.
The early indications are slightly positive but very choppy. Asian markets were weak, led by a sharp drop in Taiwan. European markets are mixed as a bombing in Athens raises come concerns. The dollar is down a tad and gold is continuing its bounce. Oil, which has been flying, is taking a rest this morning.
The only economic news on the calendar is non-manufacturing ISM for April, which is generally not a big market mover. The focus is going to shift to Friday's jobs report very quickly, which the market will use as a measure for how fast the Fed will move to increase rates.
It's not a good time to be a hero. Protect that capital.
Gary B. Smith:
