With the Fed's interest rate decision later this week it was no surprise that things were slow, and but it didn't help that it was also the Rosh Hashanah holiday, which helped shrink the ranks of traders. A slow day turned into a real yawner as volume dropped and the market churned with negative bias.
While there was quite a bit of red on the screens, it wasn't meaningful. The action simply drifted around with a few pushes and shoves from the computers. There are always folks that try to draw profound conclusions from the action, but today the only message was that we are on hold while we await the Fed decision.
Unfortunately, we have a few more days to wait and it is unlikely that the action is going to change much.
The good news is that there are a few things working. My Stock of the Week, Trevena (TRVN), did well but it is extremely narrow and random.
I have no idea how things will develop, but I do know we will have opportunities if we maintain a positive attitude and stay patient and vigilant.
Have a good evening. I'll see you tomorrow.
Sept. 14, 2015 | 1:25 PM EDT
Markets Fumble
- The action isn't that bad, it just lacks interest and energy.
Breadth is running poorly and the indices are fumbling and not doing much, but the worst thing about this action is that it could continue until the Fed makes its interest-rate decision Thursday. With the market not knowing what to expect from Janet Yellen and the gang, it can't price anything in or anticipate very much. We simply have to wait for the news and see how things develop subsequently.
The action out there isn't that bad, it just lacks interest and energy. There's a slightly negative bias but it is more a function of a lack of buying interest than a desire to exit positions. The action is still solidly in the recent trading range and it is well above the most recent areas of support. We are not going to see a whole lot of momentum.
In a market like this, I'm looking for trades, mainly in the final hour. I want to find things that may catch attention overnight and see movement tomorrow. My biggest position is my Stock of the Week, Trevena (TRVN), but I've cut back into the strength today.
The day's lows are being tested, which isn't a good sign this late in the day. Buyers are standing aside and on hold. Be prepared for more of the same as we await the Fed.
Sept. 14, 2015 | 10:40 AM EDT
Don't Force Trades You Normally Wouldn't Take
- There are some opportunities in small-cap biotech.
Market players have been expecting lackluster action in front of the Fed decision on Thursday, and that is what they have this morning. It is a good environment for the computers and high-frequency traders to push us around, and with technical conditions in poor shape, it is not a great trading environment.
In this sort of environment, you really have to have a clear plan on how you are going to approach things. It is extremely easy to become frustrated and impatient -- and to force trades that you normally wouldn't take. That can be especially true if you have struggled recently and are looking to make up some ground.
Right now, we have breadth running about 1800 gainers to 3400 decliners, and no major sector is in positive territory. There isn't much aggressive selling, but there is enough to more-than-offset the tepid buying. Apple (AAPL) is helping the bullish cause, and there is some bounce in recent victims Ambarella (AMBA), Mobileye (MBLY), GoPro (GPRO), and others.
Although the overall market picture isn't very positive, there is some decent trading -- if you are selective and have the right time frame. The best stuff I'm seeing right now is mainly in small-cap biotechnology. My Stock of the Week, Trevena (TRVN), is acting well, and I have my eye on a number of others -- including Bellicum Pharmaceuticals (BLCM), Inotek Pharmaceutical (ITEK), Second Sight Medical Products (EYES), Lion Biotechnologies (LBIO), Exelixis (EXEL) and Lexicon Pharmaceuticals (LXRX).
While it isn't an environment in which to load up on longer-term trades, there are some opportunities. You just have to manage things closely and make sure you are quick to hit the sell button as conditions develop.
Sep. 14, 2015 | 07:31 AM EDT
This Week Is a Big Waiting Game
- The Fed will ultimately determine the direction of travel.
"We never live; we are always in the expectation of living." --Voltaire
One thing is certain this week: we will be very tired of hearing talk about the Fed interest rate decision that is due out on Thursday at 2 p.m. ET.
This decision has taken on particular importance because of the very high level of uncertainty that presently exists. Economic pundits believe that there is about an even chance of a rate hike announcement. Some believe that the recent economic weakness overseas -- China in particular --will be enough to keep the Fed on hold. Others believe that there is enough improvement in the U.S. economy to push the Fed to give us the first minor rate hike in many years.
We are going to hear endless talk about this debate and unfortunately the lack of clarity is very likely to make trading quite choppy and random. There has not been a time when the market has been so clueless about the Fed, which is rather ironic due to the central bank's efforts to be more transparent.
Not only is the wait for Fed clarity going to make things difficult, but we still have two other issues to contend with. The first is the continuation of poor action in China. Stocks over there suffered their worst loss in over three weeks as it becomes painfully clear that the goal of 7% GDP growth is far-fetched.
We aren't seeing any major reaction in Europe or the U.S. to the China news so far this morning, but it is unquestionably a headwind that will keep uncertainty high and make the Fed interest rate decision more difficult. The market is pricing in China, but that doesn't mean that we can ignore it. Putting together sustained upside will be challenging.
The other major problem this market faces is technical. The charts are still in poor shape and the indices are technically broken. We do have a good trading range developing, which means that there is underlying support in place. As long as that holds, we have the capacity to regain some important technical levels and work back up toward the levels we traded at in July.
However, it is important to note that we are not seeing the V-shaped action we have seen previously and there isn't the same sort of central bank buying pressure that we have enjoyed so often before.
We have some technical issues and can't lose sight of that even when we do have some good counter-trend action. We had relatively calm and positive action on Thursday and Friday, and we are set to open positive today, but there is substantial overhead at 1990 or so of the S&P 500. It is going to be difficult to cut through that level while we wait for the Fed later this week.
It is a waiting game this week but that doesn't mean we can't look for some shorter-term trading opportunities. There will be some, but just don't forget that the Fed is going to determine the next big move in this market.
