Rev Shark:
Let the Fed-Gaming Games Begin
8/9/2005 8:30 AM EDT
"All human wisdom is summed up in two words -- wait and hope."
-- Alexandre Dumas, "The Count of Monte Cristo"
Yesterday was a rather meaningless summer day with light volume, poor breadth and a paucity of buying interest. The action wasn't terrible but it certainly didn't indicate that a turn back up was at hand. We are mired in the dog days of summer and we can expect the market to be thin and choppy. There isn't much for us to do other than wait, knock out some quick trades and hope for the best.
The FOMC interest rate decision, which is due this afternoon, may add a little excitement. Everyone is expecting another quarter-point hike but it is the accompanying policy statement that will determine the market reaction. Prior to the last decision the market was hopeful that the Fed might hint that the course of rate hikes was coming to any end. Since then we have had generally good economic news and this time there doesn't seem to be as much hope that the Fed will be less hawkish.
Unless the Fed provides some sort of hint that the rate hikes are near an end there isn't much they can do to please the market. Any increased concern about inflation in the policy statement will likely generate a negative response.
Keep in mind that the market has sustained some technical damage over the past week or so. We have suffered some damage to the uptrend lines and key support areas are being tested in some cases and breached in others. This technical softness means that the bears will be looking to short/sell strength. We have shifted from a "buy the dip" type market to a "sell the strength" environment. Keep that in mind as you contemplate your trades.
Crude oil is down slightly this morning but hit record highs yesterday. The market has not been unduly worried about strong oil but in a market that is wrestling with technical damage, negatives of that sort tend to be more bothersome. Oil provides a very convenient excuse for selling if market participants are so inclined.
We have a positive open shaping up. After three days of selling we are due for a bit of bounce and hope that the Fed may say something market friendly is probably driving some buyers. Oil is down a tad and overseas market are looking perky.
Bary b: Smith:
