Monday, August 9, 2010
Markets on Pause Before Fed Announcement Tuesday
The market's volume continues to fall off a cliff for this rally with today's NYSE volume coming in well under 800 million shares. People are on hold until they hear from the Fed tomorrow. The divergences remain in place with the other indices and the wedge pattern on the daily chart I've been talking about suggest the next big sustained move will be to the downside. With the Fed statement tomorrow we may get a sharp rally that will either reverse the same day, or sometime Wednesday. Like I said before, a picture perfect scenario for the bears would be to get a big sharp rally higher that is reversed the same day to close beneath today's intraday low, which was 1121 in the S&P.
But us bears may not be so fortunate with articles such as this one from CNBC's Fast Money touting how Fed days have brought about market rallies: "Since 2008, Fed Days Historically Good For Stocks". Obviously a good contrarian stance at this type of optimism would be that there will be little to no rally tomorrow and that the bears will come in full force right off the bat. We'll see.
In addition, the euro is looking about ready to break down but no confirmation yet. I'd like to see a break, and especially a close beneath 1.3117 to start thinking about getting aggressively short. And a euro breaking down means the US dollar will be starting a major rally, and that will put pressure on commodities as well as stocks.
The bottom line is that the stock market and euro are on the verge of a large decline that should start sometime this week. I feel that at least at this point, the easy money to the upside has been mad. So my focus is looking for shorting opportunities. The action surrounding tomorrow's Fed statement might bring about those opportunities, both in stocks and in the euro and/or dollar.
PLEASE NOTE: THIS IS JUST AN ANALYSIS BLOG AND IN NO WAY GUARANTEES OR IMPLIES ANY PROFIT OR GAIN. THE DATA HERE IS MERELY AN EXPRESSED OPINION. TRADE AT YOUR OWN RISK.