Show and tell day from FOMC..
Wednesday, May 18, 2011 at 06:17AM A little ahead of schedule and without overnight negative newsflow, but instead with more dismal US eco’ data premarket, the market was able to set foot into the late April gap for some bounce oppy’ of ~10 SP handles. Some value was found in internets, including China’s after prior day’s 3% sector beating and banks/brokers… “…, so the market can easily bounce some ahead of FOMC minutes, especially if some value is seen in high beta’s after today’s beating. Even better would be a negative overnight headline to push ES into the gap”.
A few cross currents to add in a bounce as there was no real conviction as in chasing single stocks, but, interestingly banks/brokers outperformed with many names in top SP gainers for the day after already seeing some short covering/ buy dipping on Monday.
Importantly, technical (gap) held at close, plus, market closed above 50ma.
A few questions arise. Will the banks/brokers be a driver in continuing the bounce?. Simply, is the action for real or is it the same song and dance we’ve seen over and over with any talk of rotation fizzling out within hours?. Combine the above chance and the possibility the FOMC (if more hawkish vs. statement) is priced in after hitting the gap and broader conviction may show up. CNBC report: http://bit.ly/k40lLR
Considering the FOMC minutes are not getting much scrutiny so far this week, you just don’t know if the market is prepared for any surprise hawkish noise tomorrow and/or we’ve priced it in by recent declines.
The way to gauge how market will act post FOMC April minutes will be by watching the Euro/US currency ticks, which should get quite volatile immediately after. Hawkish bias would be if timing 'signals' of exit strategy were noted.
Shadowlist addition: RLD today, see day's follow-up/comments