Yesterday can be summed up in three words: stop running games. The atmosphere of weak buying that has been forcing shorts to cover at higher prices has given way to an environment of uncertainty and indecision, which has kept buyers sidelined and allowed for the types of stop running we witnessed yesterday.
It is unclear whether the market is getting ready to roll over into a pullback here or if the weakness is just a shake before prices turn higher once again. Quite likely the market will be driven by the response to today’s interest rate decision handed down from the Fed this afternoon. Likewise, the market will be driven by sentiment. If fear of a top causes a rush toward put buying, then we will likely see the market continue higher up the wall of worry into the end of the week. If on the other hand, we see complacency and call buying into the dips, then it may be time to wrap up our long positions and start looking to get short.
Today is a good day to just sit back and wait. Trading on Fed day is generally not a good idea. The outcome of today is likely to drive the market over the next few days.
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