Dow Squeezes Out Gains; Traders Await The Fed

Small cap and Nasdaq stocks finally hit the skids with the Russell 2000 down more than a percentage point on the day. The Nasdaq closed down nearly .6% as Telecom and Utilities led the market higher. While crude hit its highest level in over a year the energy sector was not the leading gainer on the session. Financials were the worst performing sector as we near Wednesday’s Federal Reserve rate announcement where we are likely to see another quarter point hike in the Fed Funds rate. Volume on the stock exchanges was mixed, with the NYSE volume up more than 16% from Friday’s levels. Nasdaq exchange volume fell 5.8% from Friday’s session. We still remain in the nose bleed section for many of the indexes and are in need of consolidation. For now, we will obey our stops and proceed according to plan. Other than overbought conditions we do not have any other indication something dreadful is hiding around the corner. Stick with the trend.

Wednesday will be the biggest day of the month given the much anticipation of this meeting. Odds are the Fed will hike a quarter point. The statement will be heavily scrutinized as the market will want to know what is next. At this point what is to stop this market from continuing to push higher? Many will try and guess how the market will react and many of them will likely be caught in the wrong direction. The bond rout has done tremendous damage, but we have seen financials run higher. Will this reverse or simply continue? Will a rotation into biotech stocks finally happen? This group continues to be pounded both by sellers and politicians. Can’t say we blame politicians for getting after drug companies who raise life-saving drugs 500% or more. Anything is possible and we’ll certainly be on top of any trend changes.

This will be a very interesting week or at least we get to see some fireworks after the Fed. All eyes will be watching Wednesday at 2 pm eastern standard time. Until then, we’ll execute as our signals as they come.