As Investors Nervously Await the Fed, What Does the Market Really Want?
Going into this significant news with the major indexes near all-time highs is not particularly positive.
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After a strong start on Tuesday morning, the indexes reversed lower and closed with small losses. Small-caps IWM led with a gain of 0.6%, which helped to boost breadth to slightly positive. Over 1,200 names were again at new 12-month highs.
The market has been running on momentum and hopes for a positive reaction to the Fed interest-rate cut news on Wednesday. Still, with many stocks and indexes now overbought and extended, there is greater danger of a sell-the-news reaction.
To complicate matters, it isn’t clear whether the market will celebrate a bigger rate cut or not. A bigger cut may indicate that the economy is not as strong as hoped, but the likelihood is that the market will need some time to figure out what it really wants.
The fact that we are going into this significant news with the major indexes hovering at all-time highs is not particularly positive. The Fed news will be a convenient excuse to reposition no matter what it may do.
As noted, I’ve raised my cash levels quite a bit and will be looking to trade the volatility on the Fed news. I’m hoping for some drama to shake things up.
Have a good evening. I’ll see you Wednesday.
At the time of publication, Rev Shark had no positions in any securities mentioned.
