On Monday, I discussed how a very short-term rally was close at hand. I continued that yesterday morning about the prospects for a Turnaround Tuesday rally. The bulls came back to work on Tuesday in a very underwhelming way. The open was without conviction. Volume was anemic, further solidifying my stance that the market isn’t close to a low of any significance. With Apple’s disaster, stocks had a chance for a big gap down and short-term washout. But that wasn’t to be.
Today, we have the conclusion of Ben Bernanke’s final meeting as Chairman of the Federal Reserve. Fed statement day is typically a green day for stocks, especially when they are not at new highs, which they are not right now. The short-term snap back is supposed continue a bit longer before rolling over again and revisiting the recent lows, however not doing so would only add to my current intermediate-term negativity on the market.
Regarding the Fed, the market is expecting another $10 billion in taper to $65 billion per month. It’s no secret that I think any taper is absolutely the WRONG move and our markets and economy will suffer consequences from this. I have heard from people that the Fed is watching the stock market decline and will postpone the next taper. First, I think that is ludicrous. Stocks are up 10%+ just from October, let alone the roughly 150% from the March 2009 bottom. The Fed would lose even more credibility by worrying about a 3% decline without any signs of stress in the much more important credit markets. Sentiment has just notched back to neutral from being overly bullish for months. There is no way the Fed really cares about the stock market at this juncture.
It’s going to be an interesting day, especially after 2:00pm and coming from what looks like a very weak opening!
