The Morning Cup of Jo
Who ever said patience is a virtue?
Yesterday's FOMC meeting and the subsequent market reaction were about as uneventful as watching paint dry. I'm not going to speculate on why that is, but rather tell you that this wedge all the major markets are building, has to be resolved sooner than later. There is only a limited amount of time until they break one way or the other. Looking at all the road signs that have come to fruition over the last month, it wouldn't be surprising to see the break come on the downside - meaning this consolidation has been building strength for the next move down (distribution), rather than building steam to power through to the upside. This assessment is not meant as speculation for placing trades in one direction or the other, rather as a "Weight of evidence" factor when making your next investment.
If we think about it logically, corporate earnings season is coming to a close, we know that interest rates are going to increase, the Fed and BLS are finally starting to see signs of inflation (about time) and you've been reading the other professors talk about "The Carry Trade" and the impact that can have on the markets; not to mention the horrid condition of the secondary markets' technicals.
Needless to say, the markets have not made any technical headway in over 2 ½ months. We have seen the start of many formations, only to leave us with still no conclusion.
When these markets finally do decide to pierce through the wedge (up or down) it could be sharp and severe, so keep your stops close and your eye on the ball.
Until next time...
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