Going into the Fed meeting, we noticed that there was a certain kind of anxiety among the market participants. It was almost as if people were expecting some sort of surprise from the Fed policy. Instead, we got about as neutral of a Fed policy as you can get. Everything is expected from this Fed policy statement and nothing more, nothing less. This is the first relief. The second relief on the day is the kiss of 13000 on Dow. You can say that hitting 13000 is inevitable and no big deal. To many, they just have to see it to be relieved, sort of. What followed the Fed announcement was a quick trip to Dow 13000 and then a reversal of the earlier gain to eventually close in negative territory. So basically, with these two reliefs out of the way, we can finally get back into the trading business in the days, weeks ahead.
Heading into the day, we had added some commods the day before, we got a very nice bump up in the morning and as we said going into the week, we'd be selling any positions before the Fed decision if we pushed closer to 13000. The long commods', short the dollar players didn't get what they expected in the FED statement to reverse that play. In case this was to materialize, we sold out ahead and it seemed many did as well as the commods' reversed down shortly after. Now that we have the Fed thing out of the way, we can think of looking for entries again. What do we expect to happen from this market the next few weeks? We expect alot of drifting with no meaningful move from either direction. However, a market in drift mode does not mean that there isn't opportunities to trade. Keep in mind, even if the market goes in drift mode, we can still expect a swing of several hundred points in either direction on a weekly basis. This is unfortunately the nature of this market nowadays where big market swings can happen in a blink of an eye, relatively speaking.
Judging by some stock action lately, we are going to summarize some as follows.
Earning winners are still being rewarded and this is especially important for DJIM strategy. We like the story/earnings of MA/V and think the pair is a very good barometer of market sentiment. Of course, we wouldn't want to chase them at this point, but we'd rather get in on pullbacks. Oil price isn't likely to fall below $100 any time soon with summer(strong demand) season coming up. This will affect everything from solar plays, transportation, energy services and of course oil stocks. When it comes to oil related plays, it's almost ALWAYS best to buy on weakness as oppose to chase on strength. This is contrary to our strategy for playing small cap eps plays, but times have definitely changed and those plays are just not around. As far as other commodity plays go, we are waiting for some of our plays/sectors to stabilize first. A correction is still a correction, no matter how big or small. Watch the CRX as we noted yesterday for this stabilization and potential bounce. It looks as though coal stocks may have turned positive and we'd be keeping a close eye on plays like MEE, FDG etc. We also continue to like shippers as they'd probably be played right into their earnings date. Again, we'd prefer to buy on weakness. We also like select tech companies which include most of the internet stocks as most earning reports suggest that they are somewhat "immune" to economic slowdown. Basically, we are only playing the ones on our watchlist.
Bottom line, it felt we have reached the end of spring trading and summer trading is on its way. Things will definitely get a little slower from now on and this is in fact an advantage to us because we will have more time to position ourselves. We'll see what the remainder of the week brings, at this point we're not in a hurry to get back in size before the employment report and/or with the market digesting all of yesterdays events.