The Fed interest-rate decision was slightly more hawkish than anticipated but that wasn't a huge surprise in view of how the market has rallied on increased economic expectations since the election.
Unfortunately for the bulls, the announcement provided a convenient excuse to sell a market that has become extremely extended. Players have been moaning and groaning about how much of a chase everything is now, so it was a relief to finally have a bout of selling.
Breadth was the worst it has been in a while at around three-to-one negative. The number of stocks hitting new 12-month highs also contracted as the only group that attracted much interest were banks that hope to benefit from a steeper yield curve.
The Fed's decision helped to boost the dollar again, which hurt precious metals and commodities. Speculative small-caps also saw pressure as the recent euphoria dried up quickly.
A year ago, a Fed rate hike was the trigger for a sharp selloff at the end of December and into February. At the time, it was anticipated that there would be four rate hikes in 2016. There ended up being just the one we had today.
Expectations now are that the central bank will raise rates three times in 2017. That is one more hike than was forecasted in September. Given the predictive abilities of the Fed and the market the great likelihood is that the expectations will prove wrong once again.
The big issue now is whether the reversal today is the start of the topping process the bears have projected for so long. They have been looking for a more hawkish Fed to put a dagger into the heart of the seven-year-long uptrend and are still hoping for that big negative reaction to finally occur.
The bulls still have seasonality, momentum and increased optimism on their side, but the central bankers are no longer providing a tailwind and that will matter at some point.
Have a good evening. I'll see you tomorrow.