The weak market action in front of this afternoon's Federal Open Market Committee announcement is a little unusual. Over the last couple of years, the market has usually been upbeat going into Fed news, and rightfully so, as the central bank has tended to be market friendly.
But downgrades of Citigroup (C), Wells Fargo (WFC) and Bank of America (BAC) debt by Moody's are hurting the mood. Even before that, though, the action was poor outside of the big-cap momentum favorites.
Breadth on the NYSE is now better than 2:1 negative led by oil- and commodity-related stocks. Ironically, those names benefited the most from QE2, so the market is obviously not as confident about how much the Fed can inflate assets again. There is much more skepticism this time about how much of an impact another round of quantitative easing will have.
As I mentioned earlier, I've been playing some precious metals names as the U.S. dollar is under pressure as we await the Fed announcement. Silver stocks such as Endeavour Silver (EXK), Silver Wheaton (SLW), Pan American Silver (PAAS) and Alexco Resource (AXU) are of particular interest.
Given the way this market is acting, and the level of anticipation for Operation Twist, I'm not feeling confident that we're going to see a big upside move when the news comes at 2:15 p.m. EDT.