We started with a big gap up for no particular reason that I could discern. Simply an oversold bounce I would say. At any rate SPY was able to rally enough to fill Friday's big gap down. The market continues to fill those gap downs pretty quickly. Breadth was a strong +76%. Volume was slightly down from yesterday. New highs were up a bit to 20 while new lows dropped considerably to 187. Selling commenced in the afternoon and SPX closed considerably (10 points) off its high. A few nervous people in front of tomorrow's FED meeting. Understandable.
The futures stalled at the 18 SMA. They have not done enough to break the downtrend yet. There is still a good bit of room up to the 100 SMA. We could go that far and still be in a downtrend.
I did not expect the green count to rise much today, but I am a bit surprised the red count did not drop a little more then it did. Back in Nov. it dropped to 58 on the first rally day. This does not appear to be a very strong rally kick off so far. Another strong day is needed. This is still in the realm of a dead cat bounce.
There seems to be good agreement that the FED will raise rates tomorrow. There also seems to be good agreement that the market will rally. Maybe too good of agreement. Over the last week CNBC has asked quite a few people what they think about what was going to happen. I heard one person say they expect a sell the news event no matter what the FED did. Everybody else expects a sell off if they don't raise rates and a rally if they do. I commented previously I expected a rally on a rate hike also because the market seems to rally every time a central bank does or says something. After an initial spike down after the first taper announcement in Dec. 2013 the market rallied like crazy. At that time I heard quite a few people say they expected a sell off after that announcement. All I hear now is how the last two weeks of Dec. are always positive and the FED raising rates removes the uncertainty and clears the decks for an end of year rally. I have heard this scenario so many times from so many people I have to question just a bit if that will happen. It is rare the market does what so many people expect, but not impossible. While it may indeed rally after the announcement, I don't think we should be surprised should it sell off. The market really likes to screw everybody when too many people get positioned on one side of the boat. It sounds to me the long side of the boat is heavily loaded for this announcement. No mater what, expect some volatility. Even when the FED does exactly what everybody thinks it will do there always seems to be extra volatility whenever they move. Maybe we will know more about what the rest of Dec. might hold after tomorrow.
Bob
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