"To hell with facts! We need stories!"
― Ken Kesey
Selloffs like the market experienced on Monday have tended to lead to quick bounces in the past year but a negative narrative has gained some traction and is keeping some folks cautious. Early indications are for a positive open but there is concern that the character of the market is shifting and that struggles lie ahead.
The negative narrative that is developing is mainly impacting big cap technology stocks that have been market leaders for years. First, and foremost, there is intense focus on the privacy practices of Action Alerts PLUS holding Facebook (FB) . It shouldn't come as a big surprise to anyone that intense data mining has been taking place but there is now a smoking gun that makes it much easier to be outraged.
The Facebook issue would seem to impact just a small group of stocks but there are other issues facing big cap technology names. The death caused by an autonomous car has set back that emerging sector by years. Oracle (ORCL) posted a poor report, the European Union is talking about a tax on big internet names and President Trump is ready to impose tariffs on a wide variety of Chinese goods.
All of these things are giving the bears some ammunition, but it is the Fed interest rate decision tomorrow afternoon that will determine where the market is heading in the near term.
I have written many times that the market loves to love the Fed and that is especially so when there is market weakness into central bank decisions. The bankers almost always seem to give the market a reason to rally even when they are raising rates and making some hawkish comments. The market finds reason to believe the central bankers will remain market friendly.
The Fed decision tomorrow afternoon is going to serve as a trigger for a market move even if they don't do anything at all surprising. It is an event that will be traded and the way it is traded is going to depend on the setup that develops over the next 30 hours or so.
If the market continues to selloff into the Fed you can bet the buyers will be lined up to buy on the Fed decision but that may be too easy. It is much more likely that market players will anticipate a positive reaction to the Fed but we'll see where things are tomorrow before crafting a strategy for reacting to the news.
I'll be digging deep for some individual stocks to buy. The action yesterday was broadly negative but there was some small areas of positive action and there wasn't any real panic. It was healthy as far as selloffs go but the technical condition of the indices is a concern.
The bears are trying hard to build a negative narrative but with the Fed lurking it won't be easy.