Contained by the Fed

 | Dec 17, 2013 | 4:25 PM EST  | Comments
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Stock quotes in this article:

twtr

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FB

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ddd

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avgo

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rvlt

It was another lackluster day for the indices. Losses were minor and breadth was negative, but mainly they just drifted as market players seemed hesitant to do much in front of the FOMC interest-rate decision tomorrow afternoon.

The big issue, of course, is whether a tapering of bond buying will be announced. Many market pundits think a move is unlikely this close to the holidays and with the Janet Yellen confirmation coming up. But there could be hints in the policy statement, and this market is not likely to react well.

If the Fed doesn't make any moves tomorrow, we will start to worry about what will happen at the January meeting, but at least we'll have a brief respite and that may be all we need for a more positive market environment.

Many traders are champing at the bit hoping for some old-fashioned holiday action, but so far, it has been very limited. The Fed is receiving most of the blame for keeping things contained, but we should have resolution, one way or the other, tomorrow.

Have a good evening. I'll see you tomorrow.


Dec. 17, 2013 | 1:39 PM EST

More Disinterest Than Fear

  • Traders just aren't stepping up.

The indices are finding support after a very sluggish morning but this hasn't been a very lively session. Some attribute the slow trading to hesitancy in front of the FOMC policy announcement tomorrow, but it seems more like disinterest than fear.

Breadth is still negative but improved, and we have a little buying interest in chips and solar energy. Big-caps Tesla (TSLA) and Netflix (NFLX) are attracting interest but pockets of momentum continue to be very limited.

At this time of year traders typically create action out of their zeal to take advantage of positive seasonality. So far, traders aren't seeing many signs of the sort of aggressiveness that makes for upbeat "holiday" trading, but there's still time.

I sometimes wonder if my memory of the way the market traded prior to the Great Recession is faulty, but I sure don't remember there being so much disinterest so often in the old days. This really is a perfect environment to gun your stocks, but traders aren't stepping up to do the job.


Dec. 17, 2013 | 10:07 AM EST

Not Giving Up My Bullish Bias

  • But I'm staying patient and not forcing things.

Other than Facebook (FB), the early action is unimpressive. I'm surprised by the pressure, but I suspect it will be attributed to worries about tapering. Weakness in the iShares 20+ Year Treasury Bond ETF (TLT) illustrates the worries over interest rates and, ultimately, nothing is more important than that.

I haven't given up on my bullish bias but I'm going to stay patient and not force things. Breadth is running not quite 2-to-1 negative, and we really don't have any good pockets of momentum. Facebook and Twitter (TWTR) have been it lately, and that doesn't make for good stock-picking.

My stock of the week, 3D Systems (DDD), is perking up so I'm watching that. Avago Technologies (AVGO) has strong momentum on a big target and I continue to like Revolution Lighting Technologies (RVLT) for follow-through. The problem is that we need the indices to at least hold steady and not trigger more stops.

This action isn't peppy but this is the time of the year where you can do well by focusing on just one or two good trades.


Dec. 17, 2013 | 8:33 AM EST

Ignore the Big-Picture Pundits

  • Stay focused on individual stock picking.

Weak people talk and do not act; strong people act and keep quiet. --Eliphas Levi 

As the holidays approach, the news flow tends to slow. That can be helpful in producing seasonal strength. Market players always prefer to buy rather than sell so, in a benign environment, without any significant news on the wires, there will be a positive bias to the action.

Today we'll hear plenty of blather about the upcoming Federal Open Market Committee (FOMC) interest rate announcement tomorrow afternoon. But the chatter about the possibility of the Fed announcing that it will taper its quantitative easing (QE) program is likely driven by a lack of other things to talk about. It is very unlikely that a significant announcement would be made right in front of the holidays -- and while the Janet Yellen confirmation debate is going on in Congress.

We'll probably see some increased volatility around the Fed announcement tomorrow but, overall, stocks have little to impede them right now and that favors the positive seasonality that is the hallmark of the last full week of the year.

Too often when there isn't much going on in the market there is a temptation for market pundits to start making dramatic calls. They thrive on attention and the way to get it is to make declarations, such as, "We have seen the highs." For example, James Grant was on CNBC this morning. While he has some interesting comments about the big picture I highly doubt he is going to say much to make you any money in the next few days.

My advice is to ignore the big-picture pundits and stay focused on individual stock picking. That has been good advice all year long and continues to be the best way to deal with this market. Trying to time the ups and downs in the action this year has been futile especially since we have seen on-way action the vast majority of the time.

For the next couple weeks the way to make money is to focus on finding the individual stocks that are attracting aggressive traders who are emboldened by seasonality and looking to end the year on a positive note. We have already seen good examples in Twitter (TWTR) and Facebook (FB), which attracted the momentum buyers last week and went on a frantic run. There should be some other names popping up as the indices hold steady.

I am a bit concerned about the lack of energy and enthusiasm but that seems to be pretty standard these days. It will be a long time before we will see the excitement that individual investors used to provide in the days before the Great Recession. It makes for more sedate trading but it is a mistake to think that it is bearish.

We have a flat start setting up. We'll see what develops. 

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