Good morning. Here were are, likely another trading session of price swings that likely will leave us with more of what we've been getting the last two weeks. Nothing. After the 'market crash' of a few Monday's ago stocks have been trading in an increasingly narrow range forming a wonderful wedge pattern.
I think prices are going to break sharply out of this wedge, but with the FED on tap late Thursday, the action has a reasonable chance at doing what its been doing the last few weeks. Nothing.
I've been rather for most of this historic stock market rally, but the recent action has me re-thinking the short to medium term upside potential for stocks. The Ebola lows in October were swiftly bought. Prices were on their way to recovery after a 'V' bottom was reached. This time around stocks have fallen and have yet to put in a strong rally. I think this is setting up, and I've said this numerous times over the last few weeks, for a move back to the crash lows of a few weeks ago.
Let's face it, the FED will not do anything this week. They are not going to shock the market just weeks removed from a nasty market collapse. I think they are more likely this week to announce QE4 than doing anything with their current rate policy. We are nearing almost 7 years of ZIRP. Inflation remains low and the global economy is once again walking on cracked ice.
With that being said, I think status quo is priced into the market. I think the risk is to the downside and until we start to get some sort of resolution either way, it's tough to get too aggressive. We've seen the action turn on a dime. Weakness to strength, and vice versa. When this week is done, I believe we'll have the answer as to where stocks are headed in the short to medium term and the opportunity to get more involved in this market.
For what its worth, the wedge of doom or boom remains unsolved, as prices cling to the lower trendline. Could a big break lower be on the horizon?