Fitz Bits: The Fed Meeting Is Irrelevant

OK, let's look at some charts. Industrial Select Sector SPDR ETF (XLI) Hertz (HTZ) Avis Budget Group (CAR) United Rentals (URI) Yesterday was one of the more interesting trading days I've seen in quite a while. If you've been focused on some of the high-momentum names, then you'd have thought that the S&P was down 3% yesterday. Everything on the screen was red -- blood red. But that's not how things turned out. The Dow actually closed up a quarter of a percent and the S&P was essentially flat. The selling was largely confined to all those stocks that fund managers needed to trim back so they could raise cash to buy some Alibaba (BABA) on Friday. (For reasons that will remain private, I'm calling it AliBubba.) I'm looking right past the Fed announcement on Wednesday to the real market-moving event -- that magical time when Alibaba begins trading. I really don't care much about the Fed's economic outlook or its forward guidance, because both are irrelevant and not particularly grounded in reality. First, the Fed has an excellent track record for economic forecasting -- it gets it wrong without exception (if anyone can credibly point to when the Fed has gotten it right, please let me know because I sure can't think of one time). Next, the Fed is absolutely tied to the zero interest rate policy for as far as the eye can see (and think of a person standing in the middle of a really flat desert; over that horizon is where the Fed starts raising rates). So I just don't think that Janet Yellen and the rest of the Gang that Couldn't Shoot Straight will do much to move the markets one way or the other. They will probably change some language to give just the slightest hint that they know something we don't, and we'll probably see some volatility on Wednesday when the minutes are released. But that volatility will quickly dissipate and everyone will start looking to see what happens when AliBubba does the IPO dance on Friday. We could see a fiesta or a fiasco, and no one knows for sure which way things are going to go. I'd suggest that you let others worry about AliBubba. Just focus on solid social media stocks like Facebook (FB), which is likely going much higher over the next year. Hope that AliBubba knocks them down further, and then scoop them up before everyone else does. Let's go in a different direction today and look at some rental and leasing stocks in the industrial sector. The XLI ETF has been trading sideways for much of the year and is still technically in an uptrend. The price is above the 50-day moving average, which is above the 200-day moving average. But that looks like it's about to change, doesn't it? Each obvious selloff has hit a low that's been closer to the 200-day moving average than the last. So the upward momentum has been subsiding. If the price continues to trend lower, we'll see a 50-day and 200-day moving average bearish crossover. I've placed a green box at the level that I'd like to see -- if the XLI breaks into that area (around $55), then perhaps this potential top is just healthy consolidation that clears the way for higher prices. There are three related stocks that are at very low risk buy points. If the XLI takes off, these will likely join the action. Hertz has been gently trending higher for all of 2014, with a shallow slope of support connecting the last six-seven pullbacks. Look at the chart -- I just don't need to annotate it that much. The lines speak for themselves. The 200-day moving average defines support, and that's where HTZ is right now. I think you can buy this here, and keep a fairly tight stop. Avis consolidated during the summer months of June and July and then popped above resistance in early August. Between August 1 and August 18, the stock saw one down day -- a pullback of 0.44%. After that little hiccup, it ran more than 17%. If this were an internet or biotech stock, such a move wouldn't raise many eyebrows. But this type of move in CAR is not typical, nor is it sustainable. But that rally has now run its course and CAR is back to test the 50-day moving average. I think this is buyable now. United Rentals has been a crowd favorite for years after bottoming out in 2009 at $2.52. So the stock has been rewarding the bulls, and it's easy to start calling for a top. But here's the problem: This rally has been built on the broken backs of bears who were trying to predict when this strong stock would roll over. If you're a long-term bull, then ignore the next sentence and instead just move on to the next article. If you have a hard time holding stocks for years, then just keep a trailing stop below the 50-day moving average. You'll only be taken out of the stock if the uptrend is in trouble. (Oh, and then you can buy it back when it hits the 200-day moving average). Be careful out there.

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