There's going to be whole lot of consolidation for this market. Granted, it's possible that this market can just shoot up again like last week. The fact is, it takes a market ALOT longer to move up the same amount of points than it takes to move down. The majority of the time in an upmarket, is spent in the consolidation mode. Just look at a daily chart of the indices for the year. This time around, we are just glad and maybe a bit fortunate to be in the consolidation mode. Right now, we are monitoring the financials closely as they may be the catalysts to pull the carpet from this market again. The good thing is, that it would take some substantial negative news to get the financials to break the recent lows. It's not an unlikely event but the odds are diminishing if Fed is on the move to help things out. Market is currently pricing into a 25 basis cut but some are expecting more than that. What we think is important from the Fed is its language going forward. Giving less attention to the inflation while paying more attention to the current financial crisis from the Fed is what many market participants wanted. We'll just have to see how it plays out a week from tomorrow.
Back to this market! While some of the bigger tech names have been in the profit taking mode, many other plays on our screen showed resiliency. Keep in mind, plays like AAPL RIMM have almost climbed back to the level before the sell off started. Some profit taking in those names is understandable given the magnitude of the recovery of those stocks. Solars, with the exception of FSLR (analyst day), held up really well today. We can see the result from the speculative action of SOLF alone. Many China plays held up as well. LFT is in the initiation phase from the firms.
We are going to continue to see some pullbacks and consolidation from this market and we feel playing conservatively is the best thing to do before the Fed meeting. Essentially, we want to see if this market can sustain its recent gains and build a base around here. With a willing Fed and a batch of never ending negative news, we may be able to finish the year on a high note.