With the FOMC Meeting on Wednesday, Don't Expect Traders to Be Rational
The only pattern worth counting on around FOMC meetings is that there will be volatility.
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Over the last few weeks interest rates went down and homebuilders, one group that benefits from lower interest rates, went down too. That made no sense.
Then on Friday interest rates backed up and the Homies went down. Okay, that makes sense. On Monday rates were up yet again and Homies rallied. Sometimes markets are like that.
For example, the Transports headed down while oil headed down. On Monday oil rallies three bucks and the Transports finally have a decent day in the market.
Maybe everyone is just squaring up or day trading prior to the FOMC meeting this week. Folks will try and tell us that the market reacts this way or that to Powell’s press conferences on the meeting days but I looked.
January 31st the S&P closed down 79 points. The next day, February 1st it was up 60. Explain that!
March 20th the S&P gained 46 points. And we had rallied into that date. Yet if you look back, that was the high prior to a six percent correction.
May 1st saw the S&P lose 17 points. The day prior it was down 80. The day after it was up 45 points.
If you can make a pattern out of the FOMC Meetings in 2024 I tip my hat to you because I see no pattern at all. Except that we have tended to get some volatility around the event. With that in mind I should report that the Daily Sentiment Index (DSI) for the VIX is at 13. The two major indexes, the S&P and Nasdaq are at 77 and 79. It’s possible if the market trades higher on Tuesday that we come into FOMC Day with the DSI over 80 on the indexes, and the VIX hovering just over single digits. That would have me thinking we should get some volatility either on Wednesday or Thursday.
Away from that, we finally got the Russell 2000 to fill that gap that was hovering near 2000. It also bounced off a (not so great) uptrend line dating back to the November low.
Speaking of uptrend lines, the SOX continues to respect its short term (and steep) uptrend line.
It’s not as though the rally on Monday changed any of the indicators. In fact breadth on the NYSE was flat as can be with 1400 stocks up and 1400 down. Even volume ended the day absolutely flat with nearly 1.8 billion shares up and 1.8 billion on the downside.
The number of stocks making new highs was up slightly vs. Friday but new lows were up as well. Overall the trend in highs is down. If you are bullish you need to see that change. I just want to shake things up because the last month in the market has seen most stocks down and the big cap indexes rally.
