Monday, March 12, 2012

Stocks stay quiet ahead of Tuesday’s Federal Reserve FOMC announcement

Greece triggering ISDA’s rules of a credit event was a non-factor today. There was very little carry over from Friday’s event and the action resembled a good day of consolidation. Volume was light across the board as traders await tomorrow’s Federal Reserve rate decision. There weren’t too many exciting moves today except for JVAs post earnings move. All in all today was a good day for the market as tomorrow will bring on a slew of economic data and the Federal Reserve’s rate decision.

What will dominate the pundit talk tomorrow will be retail sales. The big excuse for whatever the numbers will be gasoline prices. Gasoline prices are, obviously a big component in discretionary spending. You can imagine the spin that will take place when the number is released. Trend following does not require us to guess or anticipate how the market will react to the news. We see the action and react according to our rules. It may sound simplistic, but when followed religiously it will produce substantial gains.

It would not surprise me to see a bit more volatility this week with Friday being a quadruple witching Friday. Volume should start to pick up and the Federal Reserve meeting will certainly help usher in volume. Surprisingly the VIX is not at 52 week lows despite the market being at 52 week highs. The 52 week low for the VIX is 14.27 and with the index at 15.64 it would signal we may not be at “the top.” It would be helpful if the market could continue to work sideways and continue to consolidate gains. However, with 6 distribution days on the NYSE, 4 on the S&P 500, and 3 on the NASDAQ one or two more days of distribution would certainly spell trouble for this market.

It is good to be back in the saddle for the week. Always remember to cut your losses in your trading as it is your insurance policy for your portfolio!

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